SINGAPORE (Sept 6): DBS expects August’s market choppiness to continue into September over uncertainty policy actions over central banks, the risk of escalating geopolitical tensions in the Korean peninsula plus a lacklustre 2Q results season.
“Near-term resistance for the Straits Times Index is around 3,320 with downside risk to 3,210 technical support. Below this, base support is at 3,100,” says the research house in a Wednesday report.
Consensus expects the ECB to make a decision on whether to extend or wind-down asset purchases in 2018 at its policy meeting this Tursday. The US Federal is expected to leave rates unchanged at 1.25% in the Sept 20 FOMC meeting.
“Consensus expectations for the next rate hike have back paddled to 2Q18. Our economist thinks there’s a chance that the Fed will announce the decision to unwind its balance sheet this month, followed by implementation in November or December. Meanwhile, we think the Germany federal election on 24 September is likely a non-event for equity markets as opinion polls show that a Merkel victory is well anticipated,” says DBS.
As a result, DBS recommends investors take shelter in yield stocks which should continue to find favour amid tamer Fed rate hike expectations and heightened geopolitical tensions in North Asia.
DBS’ SREIT team is picking Keppel REIT, Ascendas REIT, Frasers Logistics & Industrial Trust, CDL Hospitality Trusts, Far East Hospitality Trust and Mapletree Greater China Commercial Trust. For non-SREITs, DBS is picking Breadtalk, Hong Leong Finance and Frasers Centrepoint.
DBS also recommends investors top-slice UOB, Suntec REIT and Riverstone given they meet the following criteria -- rated “Hold’ or “Fully valued”, having less than 5% upside to target price and having outperformed the STI -- thus making them more vulnerable to profit-taking.
