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PAP wins in Singapore GE2020, but Singapore economy not out of the woods

Lim Hui Jie
Lim Hui Jie • 3 min read
PAP wins in Singapore GE2020, but Singapore economy not out of the woods
Following the People’s Action Party’s (PAP) victory in the general election last Friday, brokers have expected policy continuity in the country as Singapore continues to battle the COVID-19 pandemic.
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SINGAPORE (July 13): Following the People’s Action Party’s (PAP) victory in the general election last Friday, brokers have expected policy continuity in the country as Singapore continues to battle the COVID-19 pandemic.

The PAP won 83 out of the 93 available parliamentary seats, as well as 61.2% of the vote. The election was also a historic one for the opposition, claiming a record 10 seats in parliament.

With this clear mandate for the PAP, OCBC Investment Research analyst Chu Peng expects the government to continue its focus on policy plans such as jobs protection and creations, handling of Covid-19, and the recovery of the economy.

“Policies to help businesses and households tide over this difficult period could remain policymakers’ top priorities in the near-term,” she says.

“Any additional policy support from the government post-election could be a bonus and a boost to the market,” she adds.

Due to the Covid-19 outbreak, the Singapore economy is projected by the Ministry of Trade and Industry (MTI) to contract by 4-7% in 2020.

It adds that any impact on the stock market following the results of the election will be “temporary and insignificant”, given expectations of policy continuity in the near-term.

As such, Chu has highlighted Singtel, CapitaLand, City Developments, Ascendas REIT (A-REIT), Mapletree North Asia Commercial Trust (MNACT), ST Engineering, and NetLink NBN Trust with “buy” calls and target prices of $3.24, $3.99, $12.01, $3.52, $1.13, $3.90, and $1.10 respectively.

DBS Group Research economists Taimur Baig and Radhika Rao also note Singapore’s record response to the COVID-19 crisis, deploying fiscal support of some $93 billion, or almost 20% of GDP to tide the country through the pandemic.

However, they caution that real GDP is slated to decline by about 6% this year, with the figures for 2Q and 3Q likely to be in the 6-8% contraction territory.

Maybank analyst Thilan Wickramasinghe also broadly agree that in the near term, there is unlikely to be major policy divergence, but in the medium term, the ‘fourth generation’ (4G) leadership in Singapore could have opportunities for structural reforms.

Singapore’s advance GDP estimate for Q2 will also be out this week, and DBS’s Baig and Rao expect the figures to be downcast.

“Headline GDP growth is expected to report -8.0% y-o-y on the back of an existing travel ban, a global recession and more importantly, the implementation of the Circuit Breaker during April-May,” the analysts say, forecasting full-year GDP growth of -5.7% for FY2020.

Maybank adds significant uncertainty in the Singapore market remains from the impact of lockdowns, potential second waves of infections and US-China relations.

The STI stood at 2,644.90 points at the lunch break, down from its opening of 2,665.500 this morning.

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