Feb wrap-up: Singapore in 5
? FSSTI closes Feb at 3,242.24 pts; early month run-up was reversed as global equity markets saw knee-jerk selloff in reaction to conflict in Eastern Europe.
? Economic data still strong; Budget 22 highlights – hikes in property, consumption and income taxes.
? We keep our end-2022F FSSTI target at 3,506 pts (-0.5 s.d. from historical mean), pending a review of the 4Q21 results season.
Economic data still going strong; but clouds apparent
The FSSTI closed Feb at 3,242.24 pts (-7.35 pts mom, flat). The FSSTI peaked mid-month
at 3,441.57 pts. Late Feb saw a global sell-off as escalating tensions in Eastern Europe
added to existing concerns over impending US Fed rate hikes. Jan 22’s NODX continued
to exceed our and consensus’ estimates for the fifth consecutive month, up by 17.6% yoy.
Electronics NODX rose 14% yoy (+13.6% yoy in Dec), driven by integrated circuits. Nonelectronics NODX decelerated slightly, rising 18.6% yoy (19.9% yoy in Dec) on exports of
Specialized Machinery (+37.6% yoy) and Petrochemicals (+21.9% yoy). Jan 22 monthly
home sales were up 3.5% mom, according to Urban Redevelopment Authority (URA) data.
Private resale home volume declined (down 23.8% mom and 23.1% yoy), while HDB resale
volumes remained stable according to Singapore Real Estate Exchange (SRX).
Nevertheless, prices continue to inch up (+0.4% mom for condos and +1.1% mom for
HDBs). Budget 22 highlights were: an increase in property taxes rates; higher income tax
rates for top earners; a stepped increase in GST (from 7% currently) to 8% from 1 Jan 23,
and 9% from 1 Jan 24; a progressive rise in carbon tax; and keeping the Dependent Ratio
Ceiling for foreign workers in the construction and process sectors, while also raising
qualifying salary requirements for Employment and S-Passes. Reports on Budget 22
(Strategy, Econs).
End of 4Q21 earnings season: Results a major driver this month
4Q21 results season ends with the number of positive earnings surprises outnumbering
negative surprises by 17 to 10, with 29 companies in-line. Good earnings quarterly releases
underpinned index outperformers SCI (also new contracts), CLI and JCNC, while the
reverse was true for this month’s underperformers: OCBC and DBS; while UOL was
dragged by tighter rules for foreign work permit holders. Earnings releases also played a
major role in the mid-large cap space, with BAL and GGR (boosted by higher CPO prices)
and SILV outperforming, while poor results led to underperformance in the cases of RFMD
and AIT. In the preceding four weeks, institutional investors were net buyers, with flows
predominantly going into Consumer, Financials, Industrials, Real Estate, and Telcos while
selling Healthcare, REITs and Technology. Retail investors were net sellers for the month,
disposing of Consumer, Industrials, Real Estate, Telcos and Utilities, while buying
Financials, Health Care and Technology.
Corporate News
A special-purpose vehicle owned by management offers to take SHIN private at S$3.50 a
share. SPH to hold scheme meeting on 22nd Mar to vote on Cuscaden takeover offer, as
KEP starts arbitration proceedings against SPH.
Technical Perspective
As the 3,450 resistance capped the upside in Feb, the overbought Relative Strength Index
(RSI) eventually kickstarted a correction phase. Over the past three weeks, the FSSTI has
fallen around -7% from the 3,466 high and the ongoing bearish price action still suggests
a further retracement in the near term. Notably, the FSSTI has broken below the 60 day
moving average on 28 Feb, which signals the bears remain in control. Therefore, expect a
deeper pullback to the 3,100-3,160 support area before the uptrend resumes. For the next
leg higher, the FSSTI will likely retest the 3,450–3,500 resistance area.