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Singapore’s anti-viral budget hasn’t quieted the stock market’s worries

People walk outside the SGX stock exchange building in Singapore on June 13, 2018.(PHOTO: Roslan Rahman/AFP via Getty Images)

By Abhishek Vishnoi and Ishika Mookerjee

(Bloomberg) -- Singapore’s most-expansionary budget in more than two decades has not totally quashed the stock market’s concerns around the coronavirus outbreak.

Some market participants are still wary about how long it will take to crush the virus’ impact. That’s even as the city-state pledged S$6.4 billion ($4.6 billion) to support to the economy and said it will post its biggest budget deficit since at least 1997.

Finance Minister Heng Swee Keat said in his budget speech Tuesday he will set aside S$800 million to counter the health emergency, give S$5.6 billion in support to businesses and consumers and delay the increase of a goods-and-services tax.

The benchmark Straits Times Index rose 0.7% on Wednesday as of 10:40 a.m. local time after falling 0.5% in the previous session.

Here is what market participants are saying about Singapore’s budget:

UBS (analysts including Cheryl Lee)

  • Trims the year-end target for the Straits Times Index by 3% to 3,372, saying the virus outbreak may continue to cause declines in 2020 earnings estimates.

  • Budget will provide a 1% to 5% earnings boost for the transport, tourism and property sectors.

  • “We identified ST Engineering, Genting Singapore, Singapore Airlines, City Developments, CapitaLand Mall Trust, UOL, SATS, ComfortDelGro and SPH as the most significant beneficiaries.”

CMC Markets (strategist Margaret Yang)

  • “The number of new infections in China and Singapore will matter more than the budget for the local equity market.”

  • While the budget is positive for the economy, past experience shows it usually doesn’t have a major impact on listed companies.

  • The roadmap toward the end of 2020 is still full of uncertainty due to climate-change related events seen around the world.

  • Singapore stocks are likely to give high single-digit or early double-digit total returns by the end of the year.

CGS-CIMB (economists Michelle Chia and Sofea Azahar)

  • While the budget provides near-term support, a sustained recovery in the GDP outlook hinges on the coronavirus outbreak subsiding. CGS-CIMB forecasts growth of 0.8% for 2020.

  • Economic restructuring takes a temporary backseat as the government delayed the sales-tax hike.

Bank of Singapore (head of investment strategy Eli Lee)

  • The budget is supportive of the equity market as it brings “much-needed relief” to the nation’s retail, hospitality, aviation and real estate investment trust sectors.

  • The measures for the aviation sector will benefit shares of
    Singapore Airlines, SIA Engineering and SATS.

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