THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
KOUFU GROUP LIMITED (SGX:VL6)
SHENG SIONG GROUP LTD (SGX:OV8)
SINGAPORE TECH ENGINEERING LTD (SGX:S63)
MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)
Singapore Market Strategy - Back To The Negotiation Table
- STI’s next move hinges on trade talks – 3110 pivotal, STI should rise to 3215 if positive or fall to 3030 if negative.
- Buy early cyclicals if trade negotiation ends positively – UOB, City Developments, UOL Group, CapitaLand, Venture Corp.
- Go defensive & yield-seeking if trade negotiation collapses – Thai Beverage, Koufu Group, Sheng Siong Group, ST Engineering, CDL Hospitality Trusts, Mapletree Industrial Trust and Mapletree Logistics Trust.
- Staying positive on hospitality sector – CDL Hospitality Trusts, Jumbo Group, Genting Singapore.
US-China trade talks
- This focal event will likely determine the direction of global equity markets. The latest news of US considering curbs on investments to China has raised uncertainty ahead of talks.
- With the surprisingly weak Singapore August industrial production, a positive outcome should lift business confidence while a collapse should spell a further slowdown, raising the odds of a technical recession.
Policy decision
- Consensus is split about a rate cut at the October FOMC meeting, and the bias is for a cut in December. Meanwhile, MAS is seen easing monetary policy by lowering the slope of the band in October.
STI’s next move hinges on trade talks
- Singapore market currently trades at an inexpensive 12x (-1SD) 12-mth fwd PE. October’s directional trend will hinge on the outcome of US-China trade talks. Progress should see the pivotal support of c.3110 hold up with a retest of the September high at 3215 and if this resistance clears, the STI should head towards 3320 in the month/s ahead. However, if the talks collapse, expect a decline to 3030.
Back to the negotiation table
- Early cyclical outperformers should benefit if the upcoming trade talks opens the door for more negotiations or the enactment of upcoming tariffs is further postponed. In this scenario, our picks are UNITED OVERSEAS BANK LTD (SGX:U11), CITY DEVELOPMENTS LIMITED (SGX:C09), UOL GROUP LIMITED (SGX:U14), CAPITALAND LIMITED (SGX:C31), VENTURE CORPORATION LIMITED (SGX:V03). However, such bets are off if the upcoming talks collapse.
- Defensive and yield picks should outperform in this scenario. Our picks are THAI BEVERAGE PUBLIC CO LTD (SGX:Y92), KOUFU GROUP LIMITED (SGX:VL6), SHENG SIONG GROUP LTD (SGX:OV8), ST ENGINEERING LTD (SGX:S63), CDL HOSPITALITY TRUSTS (SGX:J85), MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) and MAPLETREE LOGISTICS TRUST (SGX:M44U).
Staying positive on Singapore hospitality sector
- We maintain our view that the hospitality sector is at the starting point of a multi-year upturn. Visitor arrivals rose 16.1% m-o-m to 1.8mil in July with a 46% m-o-m surge in Chinese tourist arrivals to 389k. The trend should continue this month with increased visitor arrivals from China during the Golden Week holiday. The recent F1 GP event drew 268k (+2% y-o-y) attendees, the second highest in the event’s 12-year history. CDL HOSPITALITY TRUSTS (SGX:J85) is our top pick.
- Besides hoteliers, JUMBO GROUP LIMITED (SGX:42R), which is a popular tourist draw, and GENTING SINGAPORE LIMITED (SGX:G13) should also benefit from increased tourist arrivals.
- See attached PDF for complete report.
Kee Yan YEO CMT
DBS Group Research
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Janice CHUA
DBS Research
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https://www.dbsvickers.com/
2019-09-30
SGX Stock
Analyst Report
0.910
SAME
0.910
0.880
SAME
0.880
1.320
SAME
1.320
4.640
SAME
4.640
2.750
SAME
2.750
