Singapore Market March 2020 Wrap Up - CGS-CIMB Research 2020-03-31: Singapore In 5

SINGAPORE AIRLINES LTD (SGX:C6L)

Singapore Market March 2020 Wrap Up - Singapore In 5

It feels as if many past crises (SARS, GFC, oil price crash) were compressed in a month. Global markets retreat as Covid-19 spreads; FSSTI -17.6% m-o-m.
We keep our end-CY20F FSSTI target at 2,050, based on CY21F P/E of 9.5x (average during GFC).
With no definite end to Covid-19 in sight, FSSTI's near-term outlook is negative. Our view is to Sell into strength.

The FSSTI closed Mar at 2,481.23pts, down 17.6% m-o-m (-530pts), just as governments around the world simultaneously try to control the spread of Covid-19, and buffer the resultant economic fallout. Oil prices suffered a double blow, as the three-year supply limit deal between OPEC and non-OPEC members collapsed. The Brent dipped to US$23 (a level last seen in 2002).
Singapore’s economy contracted 10.6% q-o-q SAAR in 1Q20, driven by sharp downturns in construction and services due to Covid-19. The Singapore government revised its official GDP forecast for 2020 downwards -- it now expects 1-4% contraction (CGS-CIMB: -2.6%).
A second round of fiscal stimulus worth S$48bn (supplementing the initial S$6.4bn) was announced. See report: Singapore Strategy - CGS-CIMB 2020-03-28: Measures To Cushion Impact, Not Turnaround
MAS also weakened the S$, by reducing the S$NEER slope of appreciation to 0%, and re-centring the mid-point to the prevailing rate.
According to Urban Redevelopment Authority (URA), new home sales rose 57.3% m-o-m in Feb, due to the low base in Jan. In contrast, Singapore Real Estate Exchange (SRX) data show Feb resale prices for non-landed private residential properties in Singapore declining 0.8% y-o-y, while volume fell 13.1%. By region, prices in the rest of central region (RCR) fell 0.8%, while prices outside central region (OCR) fell 1.3%; resale prices in the core central region (CCR) was more resilient, falling a marginal 0.1%.

All sectors declined in Mar. Tech, Maritime and Telcos were the ‘least bad’ sectors, while REITs, Consumer Goods and Healthcare led the underperformers.
Amongst index stocks, only SGX (SGX:S68) closed the month positive (spike in trading volumes); SPH (SGX:T39) and Dairy Farm (SGX:D01) (increased demand for consumer staples) rounded off the Top 3. Index underperformers were Golden Agri Resources (SGX:E5H) (decreased demand and CPO prices), Singapore Airlines (SGX:C6L), and Jardine Cycle & Carriage (SGX:C07) (acquisition by key subsidiary ASII).
In the mid-large cap space, Keppel DC REIT (SGX:AJBU) (low Covid-19 impact), and Riverstone (SGX:AP4) (glove manufacturer) outperformed. Underperformers were ESR REIT (SGX:J91U) (disposal by major shareholder), CDL Hospitality Trusts (SGX:J85), and Frasers Hospitality Trust (SGX:ACV), as travel restrictions bit hospitality REITs hard.
Institutional investors were net sellers in Mar, selling Financials, Industrials, Property and Telcos, while moving into defensives like Consumer, Healthcare and REITs. Retail investors continued to bargain hunt as prices and valuations drop, with Financials, Industrials, Telcos, and REITs getting the most fund inflows. See SGX Market Fund Flow Summary, SGX Market Fund Flow by Sector.

Singapore Airlines (SGX:C6L) to raise up to S$15bn -- S$5.3bn from rights issue, and S$9.7bn in 10-year mandatory convertible bonds (S$3.5bn now, S$6.2bn within the next 15 months). See Singapore Airlines Announcements.
Frasers Logistics & Industrial Trust (SGX:BUOU) unitholders approved its proposed S$1.58bn merger with Frasers Commercial Trust (SGX:ND8U). See Frasers Logistics & Industrial Trust Announcements.
Cromwell REIT (SGX:CNNU) completed the purchase of German properties, and sold 12 other assets. See Cromwell REIT Announcements.
SPH (SGX:T39) scrapped the purchase of Canadian aged-care assets by mutual agreement. See SPH Announcements.

Following the bearish break below the triangle in early-Mar, the bearish momentum accelerated, resulting in the FSSTI falling a whopping 17.6% in Mar. More importantly, the sharp selloff in the past six weeks has turned the market sentiment extremely bearish.
Despite a recovery in the last week of Mar, we believe the rebound is only a pullback before the downtrend resumes. Therefore, we expect the overhead resistance at 2,520-2,600 to limit the upside.
The downtrend would likely resume near the 2,520-2,600pts resistance to target the 2,200pts support, and then the 2,000pts support. See chart in attached PDF report.
(See also Straits Times Index STI Constituents Target Price)

LIM Siew Khee CGS-CIMB Research | Singapore Research Team CGS-CIMB Research | https://www.cgs-cimb.com 2020-03-31

SGX Stock Analyst Report HOLD MAINTAIN HOLD 6.27 SAME 6.27