Singapore Market July 2020 Wrap Up - CGS-CIMB Research 2020-07-30: Singapore In 5

FSSTI Straits Times Index Trend - CGS-CIMB Research |

Singapore Market July 2020 Wrap Up - Singapore In 5

Circuit breaker bites: Singapore in technical recession

  • The FSSTI closed Jul at 2,527.37 pts, down 62.54 pts m-o-m (-2.4%). Both the ECB and Fed held their benchmark rates steady, while the ECB committed to fully utilising its Pandemic Emergency Purchase Programme (PEPP) funds, citing significant downside risks. Singapore’s economy entered a technical recession, with 2Q20 GDP down 12.6% y-o-y (-41.2% q-o-q), as the circuit breaker in Apr-May disrupted economic activity.
  • Some nascent shoots of recovery were seen in Jun 20’s data: IPI fell 6.7% y-o-y, an improvement from -8.1% y-o-y in 1Q20, implying that production has resumed, especially in the electronics industry. Performance in other segments were not so positive, with demand for chemicals, engineering and general manufacturing declining by double-digits in Jun.
  • We keep our end- 20 GDP forecast at -4.9% and expect a moderate rebound of 5.3% in 2021, amidst uneven recovery and dampened consumer sentiment (also see ASEAN Econ Alpha note).
  • New home sales (URA data) in Jun rose 21% y-o-y, almost double that of May (still under the circuit breaker), although prices slipped by 1.1% q-o-q. Declines were mainly seen the suburban and fringe areas, as the Central Core Region (CCR) held firm.
  • Commercial rents remained unchanged in 2Q20 (1Q20: -0.8%), though the vacancy rate increased to 12.1% (1Q20: 11%). Retail rents fell a further 3.3% q-o-q, after declining 2.3% in 1Q20, while vacancy rate rose to 9.6% from 8% in 1Q20.

COVID-19 winners and losers. 2Q20 earnings season: mostly dismal

Key Corporate News

Technical Perspective

  • With another month of sluggish price action in Jul and the FSSTI falling -2.4%, a bearish formation, Head and Shoulders pattern has been triggered. More specifically, the bearish break below the uptrend line in the last week of Jul has validated the bearish formation signaling a deeper sell-off in the coming weeks.
  • According to bearish formation projection, the FSSTI could fall further to the 2,400 support area. Moreover, the past five consecutive days of close below the 2,600 level further highlights the growing weakness.
  • See STI chart in PDF report attached below.
  • (see also STI constituents price targets and stock ratings)

LIM Siew Khee CGS-CIMB Research | Jeremy NG Choon Heng CGS-CIMB Research | 2020-07-30
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