“In our view, there could be further downside risk to consensus earnings estimates should a full-scale trade war break out given the interconnected nature of companies in Singapore,” says Loh, as he cut his year-end STI target from 4,115 points to 3,720 points, which is pegged to a P/E multiple of 13.4 times — a level not “view as stretched for a Singapore market that is long on quality defensive names”.
Before the stunning reversal overnight on April 9, the downgrades came one after another. Just two weeks ago, the Straits Times Index (STI) breached 4,000 points for the first time, as the index was nudged higher thanks to the likes of Singapore Technologies Engineering (SGX:S63
) , which shot up by more than 40% year to date as part of a global wave of renewed interest in defence stocks. Regular outperformers such as the three banks helped with the rise as well, as they trade closer to ex-dividend.
With all the market volatility brought about by Trump’s “Liberation Day”, UOB Kay Hian estimates that the STI component stocks will suffer a 1.5% drop in earnings this year, versus earnings growth of 1.3% for the broader universe of Singapore stocks. “The selloff driven by the US’ unprecedented and perplexing tariff plans has liberated many investors of profits this year,” says Adrian Loh, head of research at the brokerage, in his April 8 note.
