Singapore equities are “almost as steady as a rock”, performing “comparatively well” this year with year-to-date (YTD) gain of 7.7%, says Carmen Lee, Singapore strategist at OCBC Investment Research.
The Singapore market has proven to be fairly resilient in these uncertain and volatile times, writes Lee. In addition, trading volume and activities have picked up sharply this year, the best year in the last four years. “This seems to indicate that interest is returning to the Singapore market,” she adds.
Singapore equities have achieved this in the face of a volatile global market. “Recent market volatility was caused by nervousness over possible defaults and regulatory concern in China. Losses extend from Asia to the US, which had largely outperformed this year. With global valuations looking rather stretched, there is a high risk of further fluctuations ahead,” writes Lee in a Sept 23 note.
See: 'Gradual recovery' for Singpost as mail flies again: OCBC
Lee urged investors to put some money into Singapore stocks. “The broad re-opening theme is likely to remain relevant for the coming 12 months. In addition, long-term high growth secular trends like digitalisation are likely to remain intact.”
“For the near- to medium-term, we expect market turbulence to continue, largely due to the regulatory risks and the possibility of more defaults in China. This may add pressure to the already fragile market sentiment. As such, it would be good to have some allocation into Singapore market for a defensive and fairly resilient exposure to stocks,” adds Lee.
Interest has been rising for Singapore stocks, says Lee, as seen from the 46% increase in traded volume so far this year, compared to the whole of 2020. “If this pace continues, there is a good likelihood that the annualised value in 2021 will be the highest in eight years,” writes Lee.
In addition, Singapore equities may soon receive a boost from Temasek and SPACs.
Citing a Sept 14 Bloomberg report, Lee notes that Temasek Holdings is looking to invest in Singapore and regional mid-cap firms. “If this takes place, it will provide a nice boost to the local market, especially for mid-cap stocks, which have been somewhat neglected.”
In addition, the pace of IPOs has slowed and there have been only six new listings this year, says Lee. “Of this, there were only three IPOs which raised a total of $337.8 million. This compared to a total of 15 issues in 2020, which raised more than $1.4 billion,” writes Lee.
Recently, the Singapore Exchange has outlined the rules for the listing of SPACs. “This could potentially help to stem the decline in IPOs and also help to attract companies which are in the high-growth phase,” says Lee.
Finally, valuations are not demanding, says Lee. “At current valuations, the STI is trading at price-earnings ratio (P/E) of 12.4 times and price-book (P/B) of 1.0 times, with an attractive estimated dividend yield of 4.4%.”
“The STI is currently trading below the 10-year historical average. In terms of P/B, it is also at below 10-year average. With optimism over the gradual re-opening of the economy, earnings have also been revised up. In addition, Singapore valuations are attractive versus other regional markets,” writes Lee.
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As at 1.34pm, the STI is trading 0.55% up at 3,091.82.
Photo: Bloomberg
