The Straits Times Index (STI) closed April up 1.7% m-o-m - its sixth consecutive m-o-m gain - riding on the continued economic recovery, say CGS-CIMB Research analysts Lim Siew Khee and Jeremy Ng Choon Heng.
The analysts note the gain in April followed the US$2 trillion ($2.7 trillion) US infrastructure stimulus package, which could potentially boost global exports.
In addition, Lim and Ng point to several economic data points that reflect Singapore's ongoing recovery, including 1Q2021 GDP figures and March non-oil domestic exports (NODX) that exceeded forecasts, and private home sales surging 96% y-o-y and 100% m-o-m in March.
“Most sectors, with the exception of property, consumer goods and consumer services, gained for the second month; with the biggest gains in the maritime, utilities and tech Sectors,” they write in an April 30 research note.
Lim and Ng highlight that index performers include Sembcorp Industries on positive stock coverage, Yangzijiang Shipbuilding Holdings on recent contract wins, and SGX on increased market turnover.
In the mid-large cap space, they highlight that gainers were Hong Leong Asia on increased stock coverage, Sinarmas Land on asset disposal and Sembcorp Marine on contract wins and its new hydrogen cell partnership.
Meanwhile, despite the good run in April, DBS Group Research analysts Yeo Kee Yan, Janice Chua and Woon Bing Yong see some shadows ahead for the Singapore market following the recent tightening of Covid-19 restrictions by the government.
To that end, they expect domestic reopening stocks, including shopping malls (Frasers Centrepoint Trust, Lendlease, Mapletree Commercial Trust, Starhill, Suntec REIT), leisure (Genting Singapore), F&B (Jumbo Group, Koufu Group) and public transportation (ComfortDelgro), will suffer a “short-term setback”.
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In contrast, stay-at-home beneficiaries Sheng Siong and Dairy Farm may get a near-term lift.
In addition, the analysts believe the resurgence in community cases may result in another delay for the Singapore-Hong Kong travel bubble, which would affect SATS, Far East Hospitality Trust and CDL Hospitality Trusts.
Yeo, Chua and Yong anticipate a rebound in US 10-year treasury yields to 2% by the year-end as US stimulus cheques put inflation in focus. To that end, they recommend avoiding REITs with a total return of less than 7% - their picks are Mapletree North Asia Commercial Trust, Prime US REIT and Mapletree Industrial Trust.
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On plantation stocks, the analysts expect crude palm oil prices to stay elevated given surging soybean oil prices and labour shortages affecting output. Their sector picks include Wilmar, First Resources and Bumitama Agri.
Nonetheless, on the whole, the analysts believe that the STI is poised to swing to a more sideways trend in the coming months. “Reintroduction of Covid-19 measures, a seasonally weak May as stocks go ex-dividend and the possible impact from index reweighting are reasons we believe the STI is poised for a pullback in the near-term,” the team writes in their May 3 note.
“We maintain our view for STI to trade sideways with resistance at 3,200-3,300 and support at 2,966-3,056 in coming month(s),” they add.
As of 11.26 am, the STI is down 0.26% at 3,176.37.
