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Singapore Strategy - DBS Research 2016-04-26: Sell before May, don’t go all away

Singapore Strategy - DBS Research 2016-04-26: Sell before May, don’t go all away

Singapore Strategy - Sell before May, don’t go all away 

  • Direction of USDSGD a decisive factor on where Singapore stocks are headed. 
  • STI – A pullback from 2965 that finds support at 2800. 
  • Take profit on these STI stocks - Genting, SembCorp Marine, Keppel Corp, SPH
  • Brent lower before higher – Accumulate SembCorp Industries & Ezion on Brent pullback to c.USD37pbl.


Possible Singapore GDP downward revision. 

  • The final figure for Singapore 1Q GDP will be released on 19 May. 
  • We see downside risk to the advance GDP figure of +1.8% y-o-y given recent weak manufacturing and export data. 

Watch the Dollar. 

  • The USDSGD's direction will be an important factor in deciding where Singapore stocks may be heading next month. The outcome of this week’s FOMC meeting will set the tone. 
  • Fund inflows to this region could come to a screeching halt if the FED turns more “hawkish” and the USD strengthens. However, should the FED continue to paint a “cautious and data dependent” approach, the USD will stay pressured and the Singapore equity market is likely to remain buoyant despite the uninspiring 1Q corporate results season. 

Blue chips rally likely to pause in May. 

  • STI now trades at slightly above the 12.09x (-1SD) FY16/FY17 PE level of 2900. Further upside for the STI beyond 2965 is hard to justify unless the USDSGD continues its decline. 
  • Furthermore, stock prices could pullback with many stocks going XD soon. 
  • Upside looks limited, another pullback looks due. We peg a range of 2800 to 2965 till end-May with support along the way at c.2860. 

Take profit on selective blue chips. 

  • Take profit on Genting Singapore, SembCorp Marine (SMM), Keppel Corp (KEP) and SPH as these stocks have risen beyond our fundamental TP. 
  • Recent negative turn of events for rigbuilders - Sete Brazil filing for bankruptcy protection and Marco Polo granted the stay of proceedings in its legal tussle with SMM - will cause a share price overhang on these stocks. 

Accumulate SCI and EZION on Brent pullback, SIE on potential dividend upside. 

  • Brent could weaken to the USD35-40pbl range before a gradual recovery beyond. 
  • Our technical view for Brent is a pullback to c.USD37pbl before another up move to USD55pbl before year-end. 
  • We look to selectively accumulate O&M stocks on Brent pullback, our picks are SembCorp Industries and Ezion
  • SIA Engineering could provide dividend upside on the release of its final results.






Janice CHUA DBS Vickers | LING Lee Keng DBS Vickers | http://www.dbsvickers.com/ 2016-04-26



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