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SI Research: A Half-Yearly Review Of The Market’s Performance
Time flies. In the blink of an eye, half of year 2018 has already gone past us as we march into the third quarter of the year. It seems like yesterday when the Dow Jones Industrial Average lifted regional markets by continuing to chart historical new highs underpinned by strong corporate earnings as a result of the tax cut, but now we are engulfed by worries of a large-scale trade war between the two largest economies of the world.
It is sometimes amusing to see how market sentiments can swing from one extreme to another so abruptly without any apparent prior warnings. As we brace ourselves for surprises in the upcoming earnings season, let us take a moment to review on how the market has performed in the first half of the year so far.
Straits Times Index Still Holding Up
The performance of local equities benchmark, the Straits Times Index (STI), can be said to be rather disappointing this year as compared to the stellar 17.9 percent gain achieved in 2017. Despite hitting a historical high of 3,615.28 on 2 May 2018 last seen in year 2007 more than 10 years ago, the momentum failed to sustain. Overall in the first half of this year, STI registered a year-to-date (YTD) net loss of four percent ending at 3,268.70 on 29 June 2018.
Technically speaking, the stock market can officially be considered to have entered into the territory of a bear market should prices fall by more than 20 percent. In that sense, STI seems to be still holding up well at the moment. The largest decline STI has registered from its peak in May 2018 to 3,191.82 on 6 July 2018 was around 11.7 percent.
Source: Shares Investment
Outperforming Stocks
To make things simpler, we will only be looking at the performances of the 30 STI constituents. Of the 14 stocks that have outperformed the STI, taxi-operator ComfortDelGro Corporation (CDG) claimed the first place with an 18.1 percent YTD return. Following Uber’s exit from the private hire scene as a result of Grab’s acquisition, CDG saw an improvement in its taxi business with bookings made through its call centre and phone app rising nine percent year-on-year in May 2018. Correspondingly, the group’s share price also rebounded after a prolonged decline as investors’ interest returned.
Immediately coming in at second place after CDG would be DBS Group Holdings (DBS) realising a YTD return of 7.1 percent. Riding on the tailwind of rising interest rates leading to higher net interest margin, DBS reported 25.7 percent increment in its 1Q18 net profit to a record $1.5 billion. At the same time, the group also proposed a final dividend of $0.60 as well as a special dividend of $0.50, pushing FY17 total payout to $1.43 a share including an interim dividend of $0.33. Consequently, DBS’s share price soared to $30.76 on 30 April 2018.
Unfortunately, the introduction of a new round of cooling measures on the local residential property market by the government on 5 July 2018 is likely to dampen DBS’s loans growth because of the resultant slowdown in property transactions. As home loans accounted for about 22 percent of DBS’s loans portfolio, the group’s share price performance is expected to be weakened in the near term.
Underperforming Stocks
Telecom operator StarHub was the biggest loser in the first half of this year posting a YTD decline of 41.8 percent. In anticipation of the fourth mobile operator TPG Telecom targeting to begin operations in the second half of the year, competition in the already-saturated telecommunication landscape looks set to escalate. StarHub is likely to be badly affected with 49.9 percent of its FY17 revenue coming from the mobile segment. In addition, the reduction of dividend payout from $0.20 to $0.16 a year also dealt the group with a heavy blow as it lost favor among income investors.
Hutchison Port Holdings Trust (HPHT) is another struggling laggard which had lost 31.7 percent. Weighed by prolonged over-supply in the global shipping industry, the group continued to report dwindling revenue and earnings. HPHT took another hit of massive selling in June 2018 when the group was removed from the MSCI Singapore Index following a revision of the index. With its last traded price of US$0.275 as at 23 July 2018, HPHT offers one of the highest yields among the STI constituents at around 9.5 percent.
Most Volatile Stock
If you are neither a momentum nor a value investor but are just looking to trade in and out of the market, then volatility would be your friend. Volatility, in this context, is calculated using the range between the stock’s highest and lowest closing price within the half-year period as a percentage of its opening price at the beginning of the year. Electronics manufacturer Venture Corporation (Venture) topped the list in this category with a volatility of 58.7 percent.
Venture came back down to earth plunging more than 40.8 percent after its share price tripled in the last two years to hit a record high at $29.51 in April 2018. The selloff was triggered by the group’s disappointing sales growth that failed to meet analysts’ estimation, amidst slowdown of sales from its major customer Philip Morris International’s IQOS electric cigarette devices in Japan. Moreover, mounting trade tensions also added on to the woes and poor sentiments over Venture’s earnings outlook.
