Singapore Equities - OCBC Investment 2020-07-13: PAP Wins Majority But Not Without Surprises

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Singapore Equities - PAP Wins Majority But Not Without Surprises

  • PAP won 2020 GE with 61.2% of votes.
  • Expecting policy continuity post-election.
  • Historical data shows no clear correlation between GE and stock market performance.



People's Action Party won 2020 GE with 83 out of 93 Parliamentary seats

  • The ruling People's Action Party (PAP) returned to power in Singapore’s 13th general election (GE) held on 10 July. The GE results saw PAP winning 83 out of 93 Parliamentary seats or 61.2% of the popular votes, down from 83 out of 89 seats in the last GE in 2015. PAP’s overall vote shares also declined by ~9 percentage points as compared to the 69.9% of votes it secured in 2015.
  • In our view, the biggest surprise on the night was the loss of Sengkang Group Representation Constituency (GRC) to the Workers Party by a tight margin of 47.9%-52.1%. This could also be considered a watershed election as it was the first time which the PAP had lost two GRCs in a single election.


Policies on jobs protection and economic recovery likely to remain in focus

  • Post-election, PAP has a clear mandate which Prime Minister Lee Hsien Loong pledged to use it “responsibly” to deal with the Covid-19 situation and economic downturn, to take Singapore “safely through the crisis and beyond”. We expect policy continuity post-election with jobs protection and creation, handling of Covid-19, and economic recovery plans remaining in focus. 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. Policies to help business and household tide over this difficult period could remain policymakers’ top priorities in the near-term.
  • As of 12 July 202, Singapore reported 45,783 total cases of Covid-19, with 94% linked to dormitory residents. As the situation is still evolving, any additional policy support from the government post-election could be a bonus and a boost to the market, in our view.


Any additional policy support could be a bonus

  • As highlighted in our earlier report Singapore Equities - OCBC Investment 2020-06-26: Heading To The Polls On 10 July; What is the likely impact on the equity market? there appears to be no clear correlation between Singapore’s general elections results and performance of stock market. Based on the Straits Times Index (FSSTI) performance from one month before the general election to one month after over the last six elections, the FSSTI registered losses four times (2015, 2011, 2006 and 1991) and gains two times (2001 and 1997). Despite a decline in PAP’s vote shares and Parliament seats, we expect any impact on the Singapore stock market to be temporary and insignificant, given our expectations of policy continuity in the near-term.
  • The FSSTI is trading at 13.6x 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. As at 9 July 2020, the FSSTI had rebounded 19% from its March lows and it is currently down 18% YTD. 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 to the market.
  • Our preferred Singapore equity Buy picks are





Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-07-13
SGX Stock Analyst Report BUY MAINTAIN BUY 3.240 SAME 3.240
BUY MAINTAIN BUY 3.990 SAME 3.990
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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