Singapore Strategy - CGS-CIMB Research 2020-06-23: General Elections On 10 Jul 2020 – Will Singapore’s 13th GE Move The Market?

SINGAPORE PRESS HLDGS LTD (SGX:T39) HRNETGROUP LIMITED (SGX:CHZ) KOUFU GROUP LIMITED (SGX:VL6) UG HEALTHCARE CORPORATION LTD (SGX:41A)

Singapore Strategy - Clearing The Decks – GE On 10 Jul 2020

Singapore has set its 13th general elections (GE) for 10 Jul, with 93 seats in 31 constituencies likely up for grabs. Key issues: fighting Covid-19 and jobs.
Typically, Singapore’s elections have muted implications on the stock market, but in these unprecedented times, the market could be scrambling for ideas.
Some names that could indirectly benefit from the elections are SPH (SGX:T39) (more coverage), HRnet Group (SGX:CHZ) (jobs creation) and ST Engineering (SGX:S63) (long-term smart city spending).

Typically, Singapore’s general elections (GE) have little or no impact on the stock market. Unlike in many other countries in the region where election results have investment implications given their perceived impact on a country’s stability and for politically-linked stocks, correlation between Singapore’s GE and its economy is more spurious.
In four of the last six elections, market reactions before and after them were muted. However, in the unprecedented times today, the market could be hungry for positive indicators. See charts in PDF report attached below.

Singapore’s 13th GE will be held on Friday, 10 Jul 2020. As the country enters into phase 2 of its circuit breaker amid minimal cases of Covid-19 in the community, this could be the best time for an election. Nomination Day is set for 30 Jun, with the minimum of nine days of campaigning before Cooling Day on 9 Jul. Safe distancing rules that restrict the size of public gatherings to five people will still apply. Traditional campaign staples like mass rallies cannot be held. Political parties also have to scale back the scope of their walkabouts in constituencies. Cyberspace and social media will be key platforms for the electorate to get their messages across to politicians. Candidates will also get airtime on national television, as part of the new, one-off constituency political broadcasts.

The main focus for this election will likely be employment and the economy. We think PAP has done well with quick-reaction initiatives such as the c.S$93bn Covid-19 related stimulus. The budget has also set aside S$13bn in Contingency Funds for quick deployment if the need arises.
We believe more Job Support Schemes could be rolled out progressively in 2021 to prevent a drastic unemployment spike. In 1Q20, overall unemployment rate rose to 2.4% (end-19: 2.3%). Retrenchments hit 3,000 in 1Q20 (4Q19: 2,670), led by the service sector (2,200 job cuts). We expect opposition parties to shift the agenda to issues pertaining to spikes in Covid-19 cases in foreign workers dormitory.

Very generally, we think SPH (SGX:T39) (HOLD, Target Price: S$1.57) could see some incremental circulation and media coverage during the GE and HRnet Group (SGX:CHZ) (HOLD, Target Price: S$0.58) could benefit from the need for job creation.
On the property front, we do not think that the government could relent on property measures (and hence benefit property stocks).
We add Koufu (SGX:VL6) and UG Healthcare (SGX:41A) and remove Sheng Siong (SGX:OV8) (after share price performance) from our country top picks.
See recent initiation coverage reports:
- Koufu Group - CGS-CIMB Research 2020-06-12: Serving Up Delights In Your Vicinity.
- UG Healthcare - CGS-CIMB Research 2020-06-22: Put On This Glove; Initiate Coverage With ADD.
Other picks remain:
Our FSSTI target is at 2,495 (12x CY21F P/E).

As the FSSTI tested a key resistance level at 2,840 points, the 61.8% Fibonacci retracement level, the sharp sell-off that followed since 9 Jun suggests that the long-term trend remains bearish. The index has fallen back below the 20 and 60 day moving average over the past three trading days, showing further signs of weakness. Therefore, we expect the current bearish momentum to sustain as the FSSTI likely drifts lower to the 2,500 support area.
On the upside, the key resistance overhead near 2,670-2,720 could be the ceiling.

LIM Siew Khee CGS-CIMB Research | Jeremy NG Choon Heng CGS-CIMB Research | https://www.cgs-cimb.com 2020-06-23

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.570 SAME 1.570

HOLD MAINTAIN HOLD 0.580 SAME 0.580

ADD MAINTAIN ADD 0.860 SAME 0.860

ADD MAINTAIN ADD 1.360 SAME 1.360