Singapore Stock Monthly Market Outlook (June 2018) - DBS Research 2018-06-04: A Temporary Slumber

Singapore Stock Market Strategy (June 2018) - DBS Vickers 2018-06-04: A Temporary Slumber

Singapore Stock Market Outlook (June 2018) - A Temporary Slumber

  • The FED is likely to hike rates by 25bps to 2% this month. Consensus expects a total of three rate hikes this year (previously 3-4) on latest Eurozone uncertainty, trade war concerns and a FED that is more tolerant of inflation overshoot. 
  • Meanwhile, OPEC members will debate on exiting a supply cut agreement at the 22 June meeting after Saudi Arabia and Russia proposed a revival in oil production. 
  • STI’s May decline is in line with our view that the 2-mth period from May-June should be net negative in a World Cup year. Expect trading activity to quieten further this month with the June school holidays and mid-month World Cup tournament, picking up again in early July. 
  • However, we do not see much downside for the STI following May’s tumble. Support at 3415 or slightly below, pegged to 12.76x (-0.5SD) 12-mth fwd PE. 



Zabivaka arrives early 



June Key events 

  • FOMC meeting - FED likely to hike rates by 25bps to 2%, consensus now expects a total of three rate hikes this year (previously 3-4) due to latest Eurozone uncertainty, trade war concerns and a more dovish FED. 
  • Start of FIFA World Cup - Expect trading activity to quieten throughout June, picking up again in early July. 
  • OPEC meeting – Possibility of OPEC and its allies exiting a supply cut agreement will be debated. Saudi Arabia and Russia propose a revival in oil production while members Venezuela and Iran will likely object. 


Bonds rally on flight to safety, ‘tolerant’ FED 

  • Flight to safety on trade war worries and political uncertainty in Italy that could see a re-election and its exit from Eurozone 
  • FED signals its tolerance to inflation ‘overshooting’ above 2% without raising rates aggressively. 
  • US 10-yr yield down 24bps to 2.87%, MAS 10-yr yield down 11bps to 2.57% in the last two weeks of May. 
  • Near-term technical action - US 10-yr yield to trade from 2.70 to 2.95. 
  • Respite for yield plays and S-REITs


June likely a quiet month, to pick up in July 

  • STI’s May 2018 decline in line with our view that the 2-mth period from May-June should be net negative with subdued trading activity due to World Cup. (see report: Singapore Monthly Strategy: Take A Break, Enjoy The Game)
  • Daily average value of shares traded on Singapore exchange down 10.2% in May to S$1,207mil compared to of S$1,344m YTD. 
  • Expect trading activity to quieten further this month as World Cup tournament and June school holiday starts. 
  • Trading activity to pick up from beginning July. 


“Rectangle pattern” continues for now, support at 3400 limits downside 

  • Our earlier view for a ‘rectangle’ rather than a triangle consolidation turning out to be true. 
  • Straits Times Index (STI) 2018 Year End objective remains 3850. 
  • STI support at 3415 or slightly below, pegged to 12.76x (-0.5SD) 12-mth fwd PE. 









Kee Yan YEO CMT DBS Vickers | Janice CHUA DBS Vickers | DBS Vickers | https://www.dbsvickers.com/ 2018-06-04



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