Market View Update
Expect STI to hold up at 3115
STI Daily
- STI broke the 3180 near-term support level yesterday on concerns of a China slowdown and rebound in US 10Y yield as bets for a March Fed rate cut faded to 60%
- Near-term trend is sideways at 3115 to 3180 heading into the FY23 results season
- Besides approaching 10.2x (-2.5SD) 12-mth fwd PE which is an extreme valuation level in the near-term, here are other tactical observations why we believe STI 3115 will hold up
STI yield vs MAS 10Y yield
- Spread between STI yield vs MAS 10Y yield is at 2.41%, which is attractive compared to the 10Y historical range of 0.5% to 2.5% (ex-2020 COVID year)
USDSGD (Daily)
- USDSGD rebound seems to offer limited upside as it approaches the 1.345-1.348 resistance level
US 10Y yield
- Rebound in US 10Y yield off 3.8% is in line with our predictions made on 3 Jan 2024
- From the price action, we continue to see the current rebound possibly heading to c.4.25% before trending down again to as low as 3.3% (38.2% downward retracement) in the months ahead
Trending Sector
Singapore Technology
Recovery intact, but remains uneven, as per latest NODX Electronics print
Dec-23 NODX Electronics – Contribution and change
Source: DBS Bank, Singstat
- Dec-23 Electronics NODX affirms our thesis of an uneven, ongoing recovery in the tech industry –
- Key segments that make up 75% of total Electronics Exports (e.g., Integrated Circuits, Telecomm Equipment, Diodes & Transistors, Personal Computers) have recovered from the Feb-23 trough
- Pace of decline narrowed for key semiconductor sub-segment, Integrated Circuits; y-o-y decline of 7.9% in December marks the slowest decline since Sep-22
- The sharpest y-o-y decline of 34.3% in Dec-23 for Personal Computers tells of the fragile recovery (since the trough in Feb-23) in the downstream and consumer electronics space
- Stocks with semiconductor exposures like UMS Holdings (BUY, TP: S$1.55) and Frencken (BUY, TP: S$1.60) should fare better, in tandem with recovery in global semiconductor sales
- Current cheap valuations may reflect the expectation of a fragile recovery for OSAT and downstream players like Venture (BUY, TP: S$15.10)
Stocks to Watch
Yangzijiang Shipbuilding
Starts the year with a bang
- Secures new orders for six units of 13,000 TEU methanol dual-fuel containerships, amounting to over US$1bn, based on our estimate
- A strong boost to order outlook with sizeable new wins making up over a third of its annual order win target of US$3bn
- Well-equipped and positioned to ride on decarbonisation and fleet rejuvenation trends in shipping
- Reiterate BUY and TP S$1.90; decent 4% dividend yield