Singapore Market Jan 2021 Wrap Up - CGS-CIMB Research 2021-01-29: Singapore In 5

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GKE CORPORATION LIMITED (SGX:595) JIUTIAN CHEMICAL GROUP LIMITED (SGX:C8R)

Singapore Market Jan 2021 Wrap Up - Singapore In 5

• The FSSTI closed Jan 21 up 2% m-o-m at 2,920.5 points. The main drivers were vaccine rollouts and the new US administration.
• Positive surprise from economic data. Private home prices hit an 8-year high. Retail and office vacancy rates improved slightly, amidst falling rents.
• We keep our 2021 year-end FSSTI target of 3,068 points, based on 14.2x forward P/E.

Promising start to the year, data surprises on the upside

• The FSSTI closed Jan 21 at 2,920.5 points, up by 58.7 points (2%) m-o-m. Markets rose, briefly flirting around the 3,000 points mark, on the back of COVID-19 vaccine rollouts, and the handover to the Biden Administration in the US. Sentiment, however, was tempered in Europe as many nations headed back into lockdown post-new year, following the spread of a new, more contagious virus variant.
• Singapore’s Dec 20 NODX came in at 6.8% y-o-y (-5% y-o-y in Nov 20), above our (-6.1%) and consensus (-0.7%) expectations, due to gains in non-electronics (+5% y-o-y, -5.3% Nov 20); petrochemicals (+11.5% y-o-y), electrical circuit apparatus (+12.3% y-o-y) and electrical machineries (+29.8% y-o-y), and a pickup in electronics (+1.7 y-o-y vs -45 y-o-y Nov 20).
• Dec 20 IPI rose 14.3% y-o-y (18.7% y-o-y in Nov 20), driven by electronics (+41.8% y-o-y), chemicals (+12.3% y-o-y) and precision engineering (+11.0% y-o-y), which offset weakness in biomed (-13.2% y-o-y) and transport engineering (- 31.5% y-o-y).
• Private home sales rose by 57% m-o-m in Dec 20, as prices hit eight-year highs on the back of pent-up demand and supported by low interest rates.
• Retail rents fell 14.7% y-o-y in 2020 (+2.9% y-o-y in 2019), posting a drop in vacancy rate from 9.6% (3Q20) to 8.8% (4Q20).
• Rents for office space fell 10.7% y-o-y in 2020 (+0.2% y-o-y in 2019); while vacancy rate inched down to 11.8% in 4Q20 (12% in 3Q20).

Market

• Most sectors again traded range-bound, as only Consumer Goods , Healthcare and O&G deviated significantly.
• Index outperformers for the month were Wilmar (SGX:F34) (rising soybean-crush and CPO prices), Thai Beverage (SGX:Y92) (potential listing of asset) and Hongkong Land (SGX:H78) (positive HK outlook), while City Developments (SGX:C09) (material losses from investment), Keppel Corp (SGX:BN4) (poor results) and ComfortDelGro (SGX:C52) (UK lockdown) underperformed.
• In the mid-large cap space, gainers were The Place Holdings (SGX:E27) (potential deals), Oceanus Group (SGX:579) and iFAST (SGX:AIY) (potential contract win), while Raffles Medical (SGX:BSL) rounded up the underperformers.
  • (Note: iFAST (SGX:AIY) has won the contract. See iFAST's announcements)
• Institutional investors bought into Financials, Consumer, and Tech while selling Property, REITs and Telcos. Retail investors took the opportunity to profit-take following gains in early-Jan, selling Financials, Consumer, Industrials, and Tech; though inflows have begun trickling in as of last week. See -
  • SGX Market Fund Flow Overview;
  • SGX Cumulative Fund Flow By Sector;
  • SGX Weekly Fund Flow By Sector.

Key corporate news

• AEM (SGX:AWX) offers S$1.15 (per share) in cash and shares to take CEI Limited (SGX:AVV) private.
  • See AEM Announcements; CEI Limited Announcements.
• Guoco Group proposes $0.70 per share offer to take GL Limited (SGX:B16) private.
  • See GL Limited Announcements.
• Fu Yu (SGX:F13) founders retire, dispose of 29.8% of shares (S$58.3m) to VCC, Pilgrim Partners Asia.
  • See Fu Yu Announcements.
• Offer at $0.65 per share by management-led consortium to take Penguin International (SGX:BTM) private.
  • See Penguin International Announcements.

Research reports that you should not miss

• We have initiated coverage on warehousing and logistics provider GKE Corp (SGX:595), riding on enhanced medical stockpiling in SG and an infrastructure boom in China.
  • See:
    • GKE Corporation - CGS-CIMB Research 2021-01-06: Green Shoots Ahead; Initiate Coverage With ADD.
    • GKE Corporation - CGS-CIMB Research 2021-01-14: Good Start To The Year.
• We also initiate coverage on Jiutian Chemical (SGX:C8R), benefitting from favourable industry dynamics, as the world’s second largest producer of dimethylformamide (DMF).
  • See Jiutian Chemical Group - CGS-CIMB Research 2021-01-15: Riding On DMF Cyclical Upswing; Initiate Coverage With ADD.

Technical perspective

• Since the FSSTI hitting the 3,000 psychological ceiling in early Jan, the failed attempts to break above the 3,000 resistance level has led to the current phase of correction. With the FSSTI falling back below the 20-day moving average, sentiment has also turned slightly bearish signalling further pressure to the downside in the coming weeks.
• Nevertheless, we expect the near-term support at 2,800 area to hold and turn the trend back into the bullish camp.
• For the next rebound, the FSSTI will likely be aiming for the 3,000 – 3,100 resistance again.

LIM Siew Khee CGS-CIMB Research | Jeremy NG Choon Heng CGS-CIMB Research | https://www.cgs-cimb.com 2021-01-29

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