May 2019 Wrap-Up - CGS-CIMB Research 2019-06-03: Singapore In 5 Mins

COMFORTDELGRO CORPORATION LTD (SGX:C52)

May 2019 Wrap-Up - Singapore In 5 Mins

The FSSTI ended May at 3,111.92pts, down 8.3% m-o-m, as US-China trade talks broke down once again. (see Performance of The Straits Times Index (STI) and Constituents in May 2019)
Meanwhile, Singapore's final 1Q19 GDP growth figure has been revised downwards to 1.2% y-o-y (flash 1.3%), or 3.8% q-o-q seasonally-adjusted annualised rate (SAAR). Correspondingly, the Ministry of Trade and Industry (MTI) downgraded its 2019 GDP growth forecast from 1.5-3.5% to 1.25-2.5%. Our economist sees further downside to our current 2019 GDP forecast of 2.3%.
Singapore's non-oil domestic exports (NODX) shrunk in 1Q19, with electronics exports down 17.2% y-o-y, and non-electronics exports down 2.6% y-o-y; a recovery in domestic demand (+2.5% y-o-y vs. 0% 4Q18) mitigated the fall in exports (+0.5% y-o-y vs. +5.6% 4Q18).

Amidst investors' flight to safety, telco was the only sector to record gains in May, while other defensives like REITs and healthcare posted marginal declines. Institutional investors were net sellers for the first half of the month and buyers in the second half, buying telcos, consumer staples and REITs, and selling developers and financials. Retail investors were net buyers for the whole month, with flows heading towards financials, industrials, developers, consumer discretionary and technology. (See SGX Market Fund Flow Overview | SGX Cumulative Fund Flow By Sector | SGX Weekly Fund Flow By Sector).
For individual mid-to-large caps and index stocks, defensives like ST Engineering (SGX:S63), CapitaLand Commercial Trust (SGX:C61U), Sheng Siong Group (SGX:OV8), Ascott Residence Trust (SGX:A68U), and Parkway Life REIT (SGX:C2PU) were the top performers.
The 1Q19 results season was underwhelming, concluding with a positive-to-negative earnings surprise ratio of only 0.3x, and banks being the sole sector outperformer (full results round-up: Strategy – Prefer liquid and large caps) However, in light of the run-up of bank stocks and poorer loan growth outlook following the extended US-China trade spat, two of the three banks were the top losers in May on the back of profit taking.
We have recently downgraded banking sector to NEUTRAL; for more in-depth coverage, refer to our report Banks – Trump Card.

Frasers Centrepoint Trust (SGX:J69U) to acquire a one-third stake in Waterway Point mall for S$433m from sponsor Frasers Property Limited (SGX:TQ5).
Yongnam Holdings (SGX:AXB) secures contracts worth S$120m in three countries.
City Developments (SGX:C09) buys
1. a 12.4% stake in IREIT Global (SGX:UD1U) and 50% of the Trust’s manager for S$77.7m;
2. a 24% stake in Chinese developer Sincere Property Group for S$1.1bn.
Indofood Agri Resources (SGX:5JS)’s parent INDF offers S$0.3275 per share (up from S$0.28 per share) to take the Indofood Agri Resources private.
Nam Cheong (SGX:N4E)’s indirect subsidiary has long-term chartering contracts worth RM80m (S$26.3m), with an option to extend the contracts' tenors valued at RM50m.

Following its strong bearish rejection off the 3,400 psychological resistance area and 61.8% Fibonacci retracement level, the STI has effectively turned back towards a long-term downtrend which started in Apr 2018. See Figure1 in attached PDF report.
Notice how the STI has been on a 4-week losing streak; this highlights its growing bearish momentum. Moreover, the bears have also broken below multiple key support areas such as the 3,200 level and 200-week moving average.
In the near term, the STI might consolidate around the 3,100 level. However, as the bearish momentum appears to be overwhelming, and given the lack of any bullish price action, we expect an eventual break below the 3,100 support level as the bears target the next critical psychological support at 2,955-3,000.

LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2019-06-03

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