July 2019 Wrap Up - CGS-CIMB Research 2019-08-01: Singapore In 5 Mins

Singapore Strategy - CGS-CIMB Research  | SGinvestors.io SEMBCORP MARINE LTD (SGX:S51)

July 2019 Wrap Up - Singapore In 5 Mins

The slow burn, net outflow

  • The FSSTI closed at 3,305.12pts, down 0.5% m-o-m, after a month-end sell down.
  • US GDP and non-farm payrolls came in above consensus forecasts. Trade tensions continue to dominate, with China’s PMI contracting for the third consecutive month at 49.7.
  • Singapore’s real GDP grew 0.1% y-o-y in 2Q19 (+1.1% y-o-y in 1Q19) but was down 3.4% q-o-q seasonally adjusted annual rate (SAAR) (+3.8% q-o-q SAAR in 1Q19), as all major segments contracted q-o-q SAAR.
  • IPI declined by 6.9% y-o-y, weighed down by Electronics, Chemicals and Transport Engineering.
  • Home prices unexpectedly rose by 1.3% for 2Q19. Jun private home sales were up 25.5% y-o-y but down 13.8% m-o-m. Both prices and number of units sold are at their 5th and 6th year highs, respectively.
  • 5M19 tourist arrivals (+1.5% y-o-y) and revenue per available room (RevPAR, flat y-o-y at S$185) missed our forecasts of 3% and 2.5% respectively for the full-year.

Sector performance

2Q19 reporting – DBS, SMM big surprise, more REIT downgrades

  • Midway through the reporting season, we see more companies buffeted by challenging global macro conditions, with the positive-negative earnings surprise ratio standing at 3:8.
  • DBS led the way with positive surprise, on higher NIM, stronger treasury income and wealth.
  • Sembcorp Marine missed on operating leverage.
  • More REITs were downgraded on steep valuations.

Key corporate news

Technical analysis: more downside

  • The failure to break > 3,400 psychological resistance in Jul suggests growing weakness. More importantly, the sharp selloff on 31 Jul at the end of the month closed below the 20-day moving average and bottom end of range (3,334) indicate an immediate bearish shift in sentiment.
  • The last time price closed below the 20-day moving average was on 6 May which accelerated a selloff with STI falling -5% over the next four weeks. Hence, the current sharp selloff could signal a similar bearish trend towards 3,200 support followed by 3,150.
  • The STI also seemed to be forming an immediate double top formation off the 3,381 resistance area, which suggests more downside.

LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2019-08-01
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