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UOBKH: 3 Things You Need to Know about the Singapore Market Now

Source: Straits Times Index, Bloomberg
Source: Straits Times Index, Bloomberg

Source: Straits Times Index, Bloomberg

With so much volatility in the market this year and high impact global event such as Brexit, investors may be wondering what their next move should be. Several research houses including DBS Research and UOB Kay Hian (UOBKH) have come out with strategies for the current earnings quarter. Here is a summary of the three key points that investors need to know about the current Singapore market.

1. Brexit

As Brexit unfolds, the Singapore market fell as a result. However, the Straits Times Index (STI) have since recovered 7.8 percent after the low from Brexit. Currently, the index is trading close to its long term price-earning (PE) mean of 15.4 times at 14.9 times of FY2016’s projection. However, there is a 23 percent discount to the price book (P/B) ratio from its mean due to the weaker return on equity (ROE). As a result, the current market looks fairly valued.

2. Results Matter

Source: Ezra, Keppel Corporation, M1 and Singapore Press Holdings, Google Finance
Source: Ezra, Keppel Corporation, M1 and Singapore Press Holdings, Google Finance

Source: Ezra, Keppel Corporation, M1 and Singapore Press Holdings, Google Finance

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With limited catalysts to the stock market in near term, investors are eyeing strongly at the results of the companies. Major names such as Ezra, Keppel Corporation, M1 and Singapore Press Holdings fell below expectations of the street and there were repercussions—prices of these stocks fell between two percent and six percent in the day they released the results.

3. Chasing Yield

Source: US Federal Funds Rate, Trading Economics
Source: US Federal Funds Rate, Trading Economics

Source: US Federal Funds Rate, Trading Economics

With the interest rates remaining suppressed, yield continues to be a crucial focus for investors. In addition, the lacklustre performance of the STI and weak corporate earnings outlook has increased the importance of yield.

Stocks to Watch Out For

Source: China Aviation Oil, Singapore O&G, Nera Telecommunications and Wing Tai, Google Finance
Source: China Aviation Oil, Singapore O&G, Nera Telecommunications and Wing Tai, Google Finance

Source: China Aviation Oil, Singapore O&G, Nera Telecommunications and Wing Tai, Google Finance

There are other stocks that are worth a watch during the current earnings season. For the top picks of potential earnings surprise, China Aviation Oil (S) Corp and Singapore O&G top the list. China Aviation Oil stands to gain from its associate due to increased traffic volume at Shanghai Pudong Airport as a result of visitors rushing to the new Shanghai Disneyland. The newly acquired skin and laser clinic by Singapore O&G also has the potential to bring higher contribution to the stock’s earnings.

In term of dividend, the surprise may come from Nera Telecommunications and Wing Tai Hldgs. Special dividends may come from both companies as Nera Telecommunications gained from its one-off disposal while Wing Tai sold its stake in Nouvel 18 to City Developments.

Source: Aspire
Source: Aspire

Source: Aspire