Singapore Strategy - DBS Research 2016-02-29: ECB and FED policy meetings come into focus

Singapore Strategy - DBS Research 2016-02-29: ECB and FED policy meetings come into focus

Singapore Market Focus - Monthly Strategy: ECB and FED policy meetings come into focus

  • ECB and FED policy meetings come into focus in March. 
  • STI – Higher low pullback around 2600, shortterm resistance around 2760. 
  • Stay with dividends – Mar/Apr seasonally supportive and central banks returning to monetary easing. 

Focus on central banks. 

  • Attention returns to central banks’ policy actions in March. Expectations are for the ECB to cut rates further into negative territory while the FED holds the Fed funds rate steady at 0.5%. 
  • Supportive monetary policies, consolidation in USD, rebound in oil price and attractive market valuations should continue to support equity markets in March. 
  • Historically, the Singapore market is underpinned by buy-on-dip interest in blue chip stocks during March and April ahead of their going ex-dividend. 

STI pullback support c.2600, short-term resistance c.2760. 

  • For the STI, we see the rebound moving higher in March but are watchful of a pullback off the near-term resistance at 2750-2770 that coincides with 11.32x (-1.5SD) FY16/FY17 PE. 
  • Pullback support is around 2600, a ‘higher low’ compared to 2530. 

Stay with Dividend. 

  • An increasing number of central banks are returning to monetary easing and the FED looks increasingly unlikely to raise rates anytime soon. 
  • For investors who are uncomfortable with the macro uncertainties that can result in further equity market volatility, we recommend companies that offer dividend yield upside. 

Top picks. 

  • Our picks include S-REITs Ascendas REIT, Mapletree Logistics Trust and Frasers Centrepoint Trust as the sector benefits from a potential delay in FED rate hikes. 
  • SembCorp Industries offers a yield of > 4% and the stock trades at our bear case TP of $2.60. 
  • We think ST Engineering, SIA Engineering, and Capitaland offer potential dividend upside. 
  • We like Sheng Siong and Venture Corp for their steady businesses and sustainable yields. 
  • Thai Bev will ride on its dominant position as a leading spirits player in Thailand while seeking new avenues of growth to transform into a regional beverage player.

Janice CHUA DBS Vickers | YEO Kee Yan DBS Vickers | LING Lee Keng DBS Vickers | http://www.dbsvickers.com/ 2016-02-29