Amid 2Q20 earnings season, CGS-CIMB Research analysts Lim Siew Khee and Jeremy Ng have identified consumer goods, tech, and REITs as outperforming sectors for the month of July, while sectors such as consumer services, property, and oil & gas (O&G) underperformed.
In a report dated July 30, Lim and Ng have maintained their target for the Straits Times Index (STI) at 2,495, still based on 12x CY21F P/E (or price-to-earnings ratio).
While the STI declined 3.1% w-o-w to 2,495.09 on Monday (August 3) afternoon, the index closed 30.79 points higher, or 1.24% up, at 2,515.70 on August 4.
For REITs, Lim and Ng have identified CapitaLand Mall Trust and Frasers Centrepoint Trust as their top picks, along with stocks such as ST Engineering, Wilmar International, Venture Corp, AEM Holdings, CSE Global, Japfa, Koufu, and glovemakers Riverstone Holdings, and UG Healthcare.
Mapletree Industrial Trust (MIT) led the top three gainers in the STI index with a 13.59% growth due to its recent inclusion and acquisition of US data centres. Keppel Corporation was the top loser for the month with a 9.40% dip due to its offshore and marine (O&M) impairments.
On investing trends, Lim and Ng saw institutional investors mostly selling, especially in the financial and industrial sectors along with REITs, although there was a “significant inflow” to tech.
Retail investors, on the other hand, continued to “wade in”, buying into industrials, telecommunications, and REITs.
The analysts note that a bearish formation has been triggered with yet another month of “sluggish price action” in July, and the STI falling 2.4% for the month.
“More specifically, the bearish break below the uptrend line in the last week of Jul has validated the bearish formation signalling a deeper sell-off in the coming weeks. According to bearish formation projection, the FSSTI could fall further to the 2,400 support area,” they say.
“Moreover, the past five consecutive days of close below the 2,600 level further highlights the growing weakness,” Lim and Ng add.
