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Singapore Monthly (Apr 2019) - DBS Research 2019-03-29: Dividends In Focus

Singapore Monthly Strategy - DBS Group Research  | SGinvestors.io VENTURE CORPORATION LIMITED (SGX:V03) STARHILL GLOBAL REIT (SGX:P40U) SINGAPORE TECH ENGINEERING LTD (SGX:S63) MAPLETREE COMMERCIAL TRUST (SGX:N2IU)

Singapore Monthly (Apr 2019) - Dividends In Focus




April Market Outlook


REITs outperformed as FED puts rate hikes on hold

  • STI was flat m-o-m as investors juggled between worries about higher US recession risks and the impending outcome of the US-China trade talks.
  • SREITs outperformed as the FED forecasted nil hikes this year and just one hike from now till end-2021.
  • Consumer goods outperformed, led by THAI BEVERAGE PUBLIC CO LTD (SGX:Y92).

Key events this month

  • MAS monetary policy statement –
    • We expect MAS to keep monetary policy unchanged given the tame inflation and uncertain global growth outlook
  • Start of 1QFY19 results season –
    • Expect another quarter of earnings cut as US-China trade talks could turn out to be inconclusive, global growth could slow down and weak business sentiment could persist
  • Possible US-China trade deal
    • Enforcement of agreements remain tricky, Trump had said existing tariffs will be in place 'for a substantial period of time' even after a deal is struck to ensure that China abides by its agreement.
    • Tariffs likely to be removed in stages depending on how much both sides abide by their part of the agreements.
    • A trade agreement between the US and China could provide relief for technology stocks (e.g. VENTURE CORPORATION LIMITED (SGX:V03)) whose business sentiment had been negatively affected by the current US-China trade war.

FED says “I’ll get back to you later”


But be careful what you wish for

  • ED’s ‘stop hike’ forecast doesn’t come free – lowers 2019 GDP growth forecast to 2.1% (prev 2.3%), inflation to 1.8% (prev 1.9%) and sees unemployment rate rising to 3.7% (prev 3.5%).
  • 'Partial inversion' of US yield curve and yield on US 10-yr treasuries dipping 2bps below that of 3-month bills have ignited recession fears 6-18 months down the road.
  • DBS rates strategist sees a close to 30% chance of the US economy dipping into recession in next 12 months.
  • Risk off → Negative for cyclicals.
  • Yield and defensive stocks are likely to outperform.

Rangebound trade, focus on trade talks and earnings season

  • At 3190, STI trades at 12.59x (-0.5SD) 12-mth fwd PE.
  • Rangebound from 3155 to 3250, pending outcome of US-China talks and 1QFY19 earnings revision.
  • April/May ex-dividend period to lend immediate support at 3155.
  • Directional break from current range determines next level
    • Fall below 3155 would point to 3080.
    • While rise above 3250 points to 3340.


Strategy


Beneficiaries of URA draft masterplan 2019


Prefer yield and defensive stocks in a ‘peak’ interest rates and uncertain growth environment


Large-cap stocks with attractive upcoming dividend payouts






Kee Yan YEO CMT DBS Group Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2019-03-29
SGX Stock Analyst Report BUY MAINTAIN BUY 21.700 SAME 21.700
BUY MAINTAIN BUY 0.750 SAME 0.750
BUY MAINTAIN BUY 4.150 SAME 4.150
BUY MAINTAIN BUY 2.000 SAME 2.000



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