Nov wrap-up: Singapore in 5

■ FSSTI closed Nov at 3,041.29 pts. Covid-19 variant Omicron is a late-month shock; the impact and trajectory are still uncertain.
■ GDP recovers, inflation inching up.
■ Keeping our end-2022F FSSTI target at 3,752pts, based on 14x P/E, historical mean supported by 12% EPS growth.

GDP back to pre-Covid levels, but a new challenge has emerged

The FSST closed Nov at 3,041.29 pts, down 156.88pts mom ( -4.91%). The FSSTI traded sideways for much of Nov, till global markets went risk-off as Omicron (13th named variant) was classified as a Covid-19 variant of concern (the highest level); the previous variant of concern was Delta (4th). Much is yet unknown about this new(er) variant apart from increased transmissibility; hence, the severity of the impact is still undetermined. 3Q21 revised GDP expanded 7.1% yoy (2Q21: 15.2 %), beating our and consensus estimates, putting GDP slightly above pre-Covid levels (3Q19). Recovery remains uneven; with Manufacturing (7.2% yoy), Finance (9% yoy) and IT (10.4%) showing resilience, while tourist-oriented sectors Accommodation (-4.1% yoy) and F&B (-4.2% yoy) have languished. Core inflation rose by 1.5% yoy in Oct, up from 1.2% yoy (Sep); headline CPI came in considerably higher at 3.2% yoy due to the sharp rise in private transportation costs due to the price of petrol. According to Urban Redevelopment Authority (URA) data, Oct 21 monthly new home sales rose by 9% mom (41.6% yoy). Units in the Outside Central Region (OCR) made up 38.2% of total sales, with the Core Central Region (CCR) and Rest of Central Region (RCR) splitting the remainder. In the resale market, condo prices continued rising for the fifteenth straight month, up 0.7% mom and 9% yoy, according to Singapore Real Estate Exchange (SRX), amidst a decreased supply of units.

Earnings season slightly better qoq

3Q21 results ended up a tad better than 2Q21’s season, with a 1.1x positive-to-negative earnings surprise ratio (2Q21: 0.95x), due to a slew of positive earnings surprises towards season-end. We reshuffle our preferred sectors; adding Consumer, and dropping Transport. Full results roundup here. Tech was the only resilient sector for Nov, due to the persistent shortage of semiconductors amidst strong demand. O&G, Financials and Healthcare saw the largest declines. Amongst the FSSTI stocks, the top ‘gainers’ were STE (strong results), GENS (already a laggard in the recovery), and VMS. Underperformers were DFI (associates’ losses), CD (softer results) and SATS. In the midlarge cap space, the outperformers were AEM (strong results), SPH (M&A) and UMS, while underperformers were OCNUS, RSTON (falling ASPs), and FR (profit taking). Institutional investors were net sellers for the preceding four weeks, selling Financials, Industrials, REITs and Telcos, while buying Consumer and Tech. Retail investors were net buyers, taking the opposite side of Institutional, in terms of sector preferences.

Corporate news

MLT to issue 212.8m new units at S$1.88 under private placement and 159.1m new units at S$1.84, to partially fund the acquisition of 17 grade-A logistical assets (value: S$1.4bn). The battle for SPH continues with improved revised offers from both suitors.

Technical perspective

With the sharp selloff of -4.91% in November, the FSSTI is currently oversold as the Relative Strength Index fell to a low of 21 on 30 Nov. In other words, the FSSTI could be bottoming out soon. Note that the last time the FSSTI was oversold, a rebound happened almost immediately in Oct 2020, leading to a 14% rebound over the next four weeks. We expect the 3,000–3,050 support area to hold once again and eventually turn the FSSTI back into the uptrend. Watch out for bullish price action near the 3,000–3,050 support area to signal the bottom and the next leg higher will likely see a retest of the 3,250 resistance.
However, if the 3,000–3,050 fails to hold, the next support to watch for a rebound would be near the 2,870 level.