Singapore Market Feb 2020 Wrap Up - CGS-CIMB Research 2020-02-28: Singapore In 5

Singapore Market Feb 2020 Wrap Up - CGS-CIMB Research | BREADTALK GROUP LIMITED (SGX:CTN)

Singapore Market Feb 2020 Wrap Up - Singapore In 5

  • FSSTI down 4.53%, at 3,010.76 pts. Markets retreat as Covid-19 spreads.
  • Official GDP forecast reduced; expansionary budget announced to mitigate impact.
  • We keep our CY20 FSSTI target at 3,275 pts for now, based on 12.5x CY21F P/E, pending our 4QFY19 earnings season wrap-up.

Markets down as contagion spreads. GDP forecast reduced.

  • The FSSTI closed Feb 20 at 3,010.76 pts, down 142.97 pts m-o-m (-4.53%), with a particularly sharp sell-down end-Feb, mirroring other major markets, as the number of Covid-19 cases picked up significantly outside East Asia.
  • Singapore’s official CY2020 GDP forecast has been revised downwards to -0.5%-1%, from 0.5%-2.5% (CGS-CIMB: +0.8%), while an expansionary budget was announced (mid-Feb) to mitigate the slowdown in economic activity, which is now exacerbated by the Covid-19 outbreak. (For more details, see our post-budget report: Singapore Strategy - Hands Are Tight and Economic reports).
  • Non-oil domestic exports (NODX) fell 3.3% y-o-y in Jan 2020, while the industrial production index (IPI) rebounded to 3.4% y-o-y in Jan 20 (-3.7% y-o-y in Dec 19). Stripping out the volatile biomed sector, the IPI fell 3.8% y-o-y, implying weakness in the manufacturing sector.
  • Based on Singapore Real Estate Exchange (SRX) data, resale prices for non-landed private residential properties in Singapore for Jan 20 rose slightly (+0.5% m-o-m, +2.3% y-o-y). By region, core central region (CCR) resale prices fell 0.8%, rest of central region (RCR) prices rose 1.5%, while outside central region (OCR) condo prices increased by 0.5%.

Broad-based selling for now. 4QFY19 earnings season closes.

  • All sectors closed in the negative territory in Feb 20. Maritime, consumer goods and industrials were the ‘least bad’, while consumer service, utilities and telcos experienced the biggest drops. As the 4QFY19 results season draws to a close, there were more beats with positive-to-negative earnings surprise ratio currently stands at 2.5-to-1.
  • Wilmar (SGX:F34) (tropical oils segment), ST Engineering (SGX:S63) (better munitions and aerospace), Venture Corp (SGX:V03) (production capacity intact), StarHub (SGX:CC3) (lower opex), Ascendas India Trust (SGX:CY6U) (positive rental reversion), and Keppel DC REIT (SGX:AJBU) (growth prospects from acquisitions) were the best performers for Feb 20, with strong earnings releases cushioning the recent sell-down.
  • Sembcorp Industries (SGX:U96) (4Q19 loss), SATS (SGX:S58) (tourism), and Mapletree Commercial Trust (SGX:N2IU) (retail) led the index losers, while Silverlake Axis (SGX:5CP) and Hi-P International (SGX:H17) were mid-large-cap underperformers due to poorer 4QFY19 earnings resulting from the 2019 US–China trade war (decreased demand and margin compression).
  • Institutional investors were net sellers in Feb, selling financials, industrials and telcos, while buying REITs, tech and property. Retail investors bargain-hunted at the latter half of the month, buying financials, industrials, telcos, and utilities, and moving out of REITs and tech.

Key corporate news

Technical perspective

  • Following the bearish reversal in Jan 20, off the confluence of resistance at the downtrend line and the 3,285 level, the long-term downtrend has resumed, leading to the FSSTI falling 4.5% in Feb. The sharp selloff at end-Feb has also effectively broken below a key cluster of support at the uptrend line and the 3,050 level, suggesting further weakness ahead.
  • More importantly, as the FSSTI has been trading within the triangle over the past 15 months, the current break below the consolidation would likely lead to a more severe sell-off to the 2,950 support area followed by 2,800.
  • Any rebound would likely be temporary as the 3,050-3,150 resistance area limits the upside.

LIM Siew Khee CGS-CIMB Research | Jeremy NG Choon Heng CGS-CIMB Research | 2020-02-28
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000