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The research team at OCBC Investment Research (OIR) believe that Singapore will emerge from the Covid-19 “ready for the next phase of technology and innovation-driven economic growth”.
This is due to the active measure already put in place by the Singapore government in a bid to curb the current spread of the virus in the country.
Highlighting the government’s Green Plan 2030, which will position Singapore to be a leading smart nation, the OCBC team believes that the pace to adopt digitalisation will continue and “will become more critical” especially with the roll-out of 5G infrastructure and a wide spectrum of products and services that were previously unavailable.
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The way the team sees it, innovation and environmental, social and governance (ESG) initiatives are not mutually exclusive.
The Singapore Green 2030 Plan is an ambitious project that focuses on the national agenda on sustainable development.
“Some of the key initiatives will be to plant 1 million more trees, reduce waste to landfill by 30% by 2030 and for all newly registered cars to be cleaner-energy models from 2030,” writes the team in a May 17 report.
“While the recent emergence of more Covid-19 cases is worrying, the longer-term development plans are intact to transform and digitalise the country – green plans can complement innovation initiatives,” it says.
“Companies which are able to respond to this are likely to play key roles in Singapore’s road to be more sustainable and innovative,” it adds.
As at the time of writing, the benchmark Straits Times Index (STI), which was up 7.4% based on the pricing level on May 14, was trading at price-earnings (P/E) ratio of 12.4 times FY2021 earnings and 11.3 times FY2022 earnings.
The index, at 1.0 times FY2021 price-to-book (P/B), is below the 10-year historical average.
Most blue chips are still offering an average dividend yield of 4.4%
The team thus believes that there is value in the Singapore market accentuated by the recent price correction.
“We continue to favour a stock pick strategy and some of our picks include Ascendas REIT (A-REIT), Ascott Residence Trust (ART), CapitaLand, CapitaLand Integrated Commercial Trust (CICT), City Developments Limited (CDL), Frasers Logistics and Commercial Trust (FLCT), Mapletree North Asia Commercial Trust (MNACT), Netlink NBN Trust, UOB and UOL,” it writes.
The team has also highlighted that the banking sector is one of the key outperformers in 2021.
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“The FTSE All-Share Financials Index is up 10.0% year-to-date (y-t-d). Industrial stocks have also done well, with the FTSE All-Share Industrials Index up 12.9% y-t-d,” says the team.
“However, gains were not across the board and several sectors are still down for the year and this includes real estate (-1.5% y-t-d), REITS (-3.0% y-t-d), technology (-1.9% y-t-d) and energy (-4.9% y-t-d).”
Other sectors to watch, according to the team include S-REITs for their recovery despite the temporary setback from the heightened measures; developers due to the buoyant physical market; industrials with most companies “on the path to recovery”; hospitality REITs, which are on their way to a gradual recovery amid volatility; telcos as they get ready for 5G and supporting the Smart Nation initiative; and consumer stocks.
Despite the pandemic, the digitalisation of the Singapore economy continues uninterrupted with one example being on the 5G front.
“The 5G network will form the backbone of the country’s push for innovation, create more jobs and opportunities, and transform the island into a leading digital economy, attracting more talents and corporates to grow their investments here,” says the team.
As at 3.10pm, the STI is trading 14.86 points higher or 0.5% up at 3,119.07.
