Singapore Equities - OCBC Investment 2020-06-26: Heading To The Polls On 10 July; What is the likely impact on the equity market?

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Singapore Equities - Heading To The Polls On 10 July

  • Parliament dissolved; polling date on 10 July.
  • Economy and employment to be key issues of focus.
  • Historical data shows no clear correlation between General Elections and stock market performance.



Calling for General Elections amid stabilised COVID-19 situation

  • Singapore’s Prime Minister Lee Hsien Loong announced the decision to call for the General Election (GE) in a televised address on 23 June. Nomination Day will be on 30 June and polling date is set to be on 10 July to give the new government a fresh five-year mandate.
  • Despite a more stabilised COVID-19 situation, safe distancing rules which restrict the size of public gatherings to five people remain to prevent the risks of 2nd wave infections. This means that some traditional campaigning methods like mass rallies are not allowed and walkabouts in constituencies will be limited to five people. Political parties may have to turn to online channels such as social media to broadcast their political messages.


Focus on jobs protection and economic recovery

  • The focal points surrounding this election will likely be on jobs protection, the government’s handling of COVID-19 and economic recovery plans. The COVID-19 pandemic has exacted a heavy toll on the Singapore economy, which is projected by the Ministry of Trade and Industry (MTI) to contract by 4-7% in 2020. This could potentially be the worst recession since Singapore’s independence in 1965.
  • To cope with the heightened economic headwinds from the COVID-19 pandemic, the government announced record support packages amounting to S$92.9b, or ~19% of Singapore’s GDP over four Budget announcements. Various measures were announced to preserve jobs and increase the survivability of businesses and households, such as the Wage Support Scheme, Jobs Support Scheme, rental reliefs and cash payouts to each household etc.
  • Singapore’s total and resident unemployment rates rose to 2.4% and 3.3% respectively in 1Q20, with further risks in 2Q20 when the Circuit Breaker period was implemented. Creation and protection of jobs could be key areas to be addressed during GE, in our view.
  • As housing affordability remains a key issue, we do not expect the government to introduce any broad-based relaxation of the current property cooling measures such as the ABSD and the LTV ratio in the near-term, despite the fact that private residential property prices saw its first q-o-q decline in 1Q20 (-1.0%) after rising for three straight quarters.


What is the likely impact on the equity market?

  • As shown from the charts in PDF report attached (Exhibit2), there appears to be no clear correlation between Singapore’s general elections and performance of stock market. Based on the Straits Times Index (STI) performance from one month before the GE to one month after over the last six elections, the STI registered losses four times and gains two times.
  • As of 24 June 2020, the STI rebounded 18% from its March lows at 2,233.48, driven by record stimulus packages, stabilisation of COVID-19 infections, and re-opening of the economy in Phase 2.
  • The STI is trading at 13.2x PE, near its 10 year mean of 13.3x. Consensus EPS growth this year is estimated to be -20.9%, and we believe that the negative impact from COVID-19 has largely priced in. While 2Q earnings are likely to remain weak given the 2 months of Circuit Breaker impact, stimulus packages such as the Job Support Scheme (JSS) and wage support scheme could provide some buffer to cashflows.
  • With the early re-opening of Phase 2 and barring any spike in new infection cases ahead, we expect to see a recovery in 2H and any additional support measures from the government could be a bonus.
  • See


Singapore Equity Picks






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-06-26
SGX Stock Analyst Report BUY MAINTAIN BUY 3.990 SAME 3.990
BUY MAINTAIN BUY 3.240 SAME 3.240
BUY MAINTAIN BUY 12.010 SAME 12.010
BUY MAINTAIN BUY 3.520 SAME 3.520
BUY MAINTAIN BUY 1.130 SAME 1.130
BUY MAINTAIN BUY 3.900 SAME 3.900
BUY MAINTAIN BUY 1.100 SAME 1.100



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