May wrap-up: Singapore in 5
? The FSSTI closed at 3,232.49 pts on 31 May, down 124.41pts mom (-3.71%).
? Amid decelerating economic growth, key downside risks include local
inflation, supply chain issues and overzealous monetary tightening.
? We maintain our end-2022F FSSTI target unchanged at 3,475 pts, based on
a -1 s.d. forward P/E of 12.5x.
Economic growth slows, trifecta of risks loom
The FSSTI closed the month at 3,232.49 pts, down 124.41 pts mom (-3.71%). Apr 22’s
NODX underperformed both our and consensus’ estimates, up 6.4%, as China’s extended
city lockdowns affected global supply chains and exports to China. Electronics NODX
continued to grow, +12.8% yoy (Apr), vs. +11.5% (Mar), underpinned by integrated circuits
and telecommunication equipment. Non-electronics NODX, however, decelerated to
+4.6% yoy (Apr) vs. +6.8% yoy (Mar). GDP growth decelerated from +6.1% yoy in 4Q21
to +3.7% yoy in 1Q22, after a slight upward adjustment from the advance estimate of +3.4%
yoy due to revisions in the goods and services sectors. Although we maintain our GDP
growth forecast of 4.2% for 2022, we expect significant downside pressure from i) inflation
in Singapore; ii) supply chain disruptions (China and Russia-Ukraine); and iii) faster-thanexpected monetary tightening in the US and Europe. According to Urban Redevelopment
Authority (URA) and Singapore Real Estate Exchange (SRX) data, Apr 22 sales volumes
for new private homes and resale HDBs remained flat, while resale homes dipped slightly,
down 2.2% mom.
Quiet earnings season
The 1QCY22 earnings season was relatively muted. We are defensive near term, liking
REITs and high dividend yield stocks, though in the longer term, we are positive on
domestic recovery plays and capital goods (Report). Most sectors closed lower in May with
only Maritime and Industrials bucking the trend. Top index gainers were JM (recovery of
subsidiaries business), VMS (better-than expected results), and UOL (insider transaction)
while the biggest losers were DBS (high base effect), MLT (decent results but uncertain
outlook), and CLI (pullback from highs). In the mid-large cap space, GER (acquisition),
SMM (increased demand), and EREIT (recovery in EU/US markets) were the best
performing stocks, while RSTON (reduced demand for healthcare gloves), SML and GGR
(short-lived now-rescinded palm oil export ban) underperformed. During May, institutional
investors were net sellers, divesting Financials and REITs, and buying Developers,
Technology, and Telcos. Retail flows in the same period were flat, moving out of REITs
and Financials, and into Developers, Industrials, and Telcos.
Corporate News
MCT and MAGIC unitholders approved the merger to create Singapore’s third largest REIT.
TTJ’s controlling shareholder made a S$0.23 per share offer to take the company private.
AREIT announced plans to acquire 7 logistics properties in Chicago for S$133.2m.
Research report you should not miss
We initiated coverage on CLI, CAPL’s real estate investment management (REIM)
business post-restructuring, with ADD and TP of S$4.59, underpinned by: i) growth in funds
under management (FUM) and fee income; ii) efficient capital deployment; iii) and improved
operating performance of its investment and lodging properties as borders reopen. Report.
Technical Perspective
While the FSSTI was down 6% at its lowest (mid-month), it regained some ground to close
at 3,232.49 (month end), above the psychological support of 3,200. Additionally, the MACD
indicator shows a bullish crossover, supporting the bullish narrative for the index. The larger
symmetrical triangle suggests further sideways movement, and the short-term target is
3,305-3,342, which is the mid-point of the symmetrical triangle. After which, there is a high
probability that the Straits Times Index will face a strong correction towards the 3,217 level.
Long-term support remains at 3,110.85