Singapore Market December 2020 Wrap Up - CGS-CIMB Research 2020-12-31: Ending The Annus Horribilis On A Positive

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Singapore Stock Market STI 2021 Year-End Target

Singapore Market December 2020 Wrap Up - Ending The Annus Horribilis On A Positive

• STI closed the year at 2,843.81 points (+1.3% m-o-m).
• Resurgence of COVID-19 in other countries crimped exports.
• Reiterate our 2021 year-end STI target of 3,068 points, based on 14.2x forward P/E.

Ending the annus horribilis on a positive

• The STI closed Dec at 2,843.81 points, up 37.9 points (+1.3%) m-o-m, as the initial exuberance of a working COVID-19 vaccine was tempered by the emergence of a new, more contagious virus strain. This is about 12% lower y-o-y, but still approximately 27% above the 2,233.48 index-low in late-Mar 20.
• 4Q20F GDP is expected to contract by 4.5% y-o-y, according to a poll of private sector economists by the Monetary Authority of Singapore.
• Official forecast has FY20 GDP down 6-6.5% y-o-y (CGS-CIMB: -5.7%). Nov 20 NODX declined 4.9% y-o-y (-3.1% y-o-y in Oct), dragged by petrochemicals, pharmaceuticals, and electronics, as the ‘third wave’ of COVID-19 dampened external demand.
• Among our trading partners (which account for 32% of Singapore’s NODX), the EU (-24.6% y-o-y in Nov vs. +0.8% y-o-y in Oct), China (-18.4% y-o-y in Nov vs. +5.0% y-o-y in Oct), Indonesia (- 10.9% y-o-y in Nov vs. -10.7% y-o-y in Oct) and South Korea (-9.0% y-o-y in Nov vs. -13.0% y-o-y in Oct), experienced the biggest drops.
• Nov 20 property sales rose 19% m-o-m as more new projects were launched, reversing Oct’s decline from the government clampdown on the issuance of Options to Purchase (OTPs).

Sector round-ups and fund flows

• Most sectors stayed range-bound in December 2020, with Healthcare, O&G and Consumer Goods being standouts.
• STI movers for the month included gainers CapitaLand Integrated Commercial Trust (SGX:C38U) (new merged entity), Wilmar International (SGX:F34) (share buyback), and Yangzijiang Shipbuilding (SGX:BS6) (new orders); and losers Sembcorp Industries (SGX:U96) (impairments), SATS (SGX:S58) (profit-taking following vaccine news spike), and SingTel (SGX:Z74) (reduced dividends despite winning digital bank license).
• In the mid-large cap space, gainers were NanoFilm Technologies (SGX:MZH) (new listing), Japfa (SGX:UD2) (asset disposal and special dividend), and Raffles Medical (SGX:BSL); while iFAST Corporation (SGX:AIY) (failure to win digital bank license), Riverstone (SGX:AP4) and Sembcorp Marine (SGX:S51) led the losers.
• Institutional buyers reverted to selling on profit-taking as markets were buoyed by vaccine announcements in Nov. Fund flows went into Financials Services and Property, while exiting Consumer, Industrials and Telcos. Retail sentiment, however, remained strong, with inflows into all sectors, save for Property; largest inflows went into Telcos, REITs and Industrials. See 
  • SGX Market Fund Flow Overview,
  • SGX Cumulative Fund Flow By Sector,
  • SGX Weekly Fund Flow By Sector.

Key corporate news in December 2020

• First REIT (SGX:AW9U) proposed a rights issue on a basis of 98 per 100 units currently held, at $0.20 per unit, raising S$158.2m. See First REIT's announcements.
• Soilbuild REIT (SGX:SV3U) chairman and Blackstone made an offer of S$0.55 per unit to take the REIT private. See Soilbuild REIT's announcements.
• Keppel Land is divesting Keppel Bay Tower to Keppel REIT (SGX:K71U) at a valuation of S$657.2m, acquisition to involve fundraising (details pending), see Keppel REIT's announcements.
• ARA LOGOS Logistics Trust (SGX:K2LU) seeks to raise S$50m for acquisitions with a preferential offering at S$0.5525 per unit. See ARA LOGOS Logistics Trust's announcements.

Research reports on outlook of 2021 that you should not miss

• We released our 2021 outlook reports for Singapore:
  • Navigating Singapore - CGS-CIMB Research 2020-12-09: Injection & Hope,
  • Singapore Telcos - CGS-CIMB Research 2020-12-10: Back Online In 2021.
• 2021 outlook reports for Regional:
  • Navigating Asia Banks - CGS-CIMB Research 2020-12-02: Getting Ready For Takeoff,
  • Navigating Asia Property - CGS-CIMB Research 2020-12-16: Playing Catch Up,
  • Economics Focus - Emerging from the shadows.
  • APAC 1Q21 Outlook: From fear of infection to fear of inflation.
• We are bullish on the back of global economic recovery, low interest rates, high liquidity and expansionary fiscal policies.

Technical perspective

• Dec saw the STI trading sluggishly, within a consolidation range of around 2%, but the immediate rebound off the 2,800 support area and 20-day moving average further validated the uptrend strength.
• Note that the bullish crossover signal between the 20-day and 60-day moving averages on 10 Nov first hinted at the start of the bullish trend. Multiple bullish price actions were later identified near the 2,800 support area in Dec, showing some signs of strength.
• More importantly, the rebound on 30 Dec broke above both the pullback line and the 20-day moving average, suggesting the resumption of the uptrend. Thus, we expect the STI to trend higher to test the 3,000 to 3,100 resistance area over the coming weeks before seeing some correction. The 2,800 support area could be the new floor for this uptrend. See chart in PDF report attached below.

LIM Siew Khee CGS-CIMB Research | Jeremy NG Choon Heng CGS-CIMB Research | https://www.cgs-cimb.com 2020-12-31

SGX Stock Analyst Report ADD MAINTAIN ADD 1.250 SAME 1.250