Market Trend Analysis

Topic #5 – History suggests a strong 1H of > 10% (since 1989) bodes well for 2H

Analyst: Zane Aw

– The S&P 500 delivered a stellar return of >15% in 1H23 and history suggests a strong 1H of > 10% gains in the last 10 instances since 1989 bodes well for 2H

– In these past 10 instances, the S&P 500 has continued to deliver positive returns in 2H. The average 1H return was 14.82% while the 2H typically provided slightly lower average returns of 11.16%

– Investors should remain vested as the market generated very healthy annual returns averaging 27.61% in the last 10 instances when 1H returns > 10%

Week 27 equity strategy: The Singapore market is down 1.4% in 1H23. Amidst this downturn, there were notable performers – conglomerates SembCorp Industries (+70%) and Keppel Corp (+41%). We believe a reason for the performance was the strength in domestic electricity margins. Electricity capacity in Singapore has declined by almost 13% since 2018 to 11.8Gw currently. This is unlikely to change until 2025. Meanwhile, demand growth has averaged 3% p.a. the past two years. This tightening of reserve margin and rising electricity prices will boost profits. 2Q23 should see another strong quarter. The average electricity price in 2Q23 is trending at S$374 (2Q22: S$297). The temporary price caps could deter spot pricing upside by between 3-10%.

Nasdaq showed a remarkable performance, surging by 32% in 1H23. The primary driver was a re-rating of valuations. Valuation over this period jumped 35% from 27x forward PE to 36x. There was optimism over the structural growth story behind AI, new products and cost-cutting. This was despite earnings being lowered by 2%. Regrettably, it was the opposite for Singapore. Forward valuations declined from 12x to 11x PE. This was despite a 14% upward revision in earnings. Another impressive performer was Japan. The Nikkei gained 27% this year, led by a 40% upgrade in earnings (USD dollar terms).

Paul Chew
Head Of Research

SINGAPORE shares ended the final trading day of the week flat, as investors exercised caution and kept watch on macroeconomic data points. Singapore index fell 0.04 per cent or 1.37 points to end Friday (Jun 30) at 3,205.91. Decliners narrowly beat out advancers 266 to 254, with 1.6 billion securities worth a total of S$1.9 billion changing hands.

WALL Street stocks concluded a winning quarter with a flourish on Friday (Jun 30), cheering better inflation data as Apple surged to a valuation of over US$3 trillion. All three indices spent the entire session in positive territory after the personal consumption expenditures index measure of inflation eased to 3.8 per cent year-on-year in May, a significant drop from 4.3 per cent a month earlier. The broad-based S&P 500 finished at 4,450.38, up 1.2 per cent for the day and more than eight percent for the quarter. The Dow Jones Industrial Average gained 0.8 per cent to 34,407.60, while the tech-rich Nasdaq Composite Index advanced 1.5 per cent to 13,787.92.

Top gainers & losers





ARA US Hospitality Trust has agreed to divest its hotel, Hyatt Place Oklahoma City Airport, for US$8 million as part of efforts to optimise the trust’s portfolio. The purchase amount will be received in cash, and the managers will be entitled to a divestment fee of 0.5 per cent of the sale consideration, or about US$40,000. For illustrative purposes, the pro-forma distribution per stapled security of the trust would rise to US$0.03074 from US$0.03054 for FY2022 if the sale had been completed on Jan 1, 2022.

ASIA-PACIFIC Strategic Investments will no longer acquire Catapult Ventures, which owns personal financial marketplace MoneySmart. In a bourse filing on Friday (Jun 30), APS said that both parties mutually agreed not to extend the long stop date for the sale and purchase agreement, citing “adverse current market conditions”. The deal then lapsed on Jun 30.

DERIVATIVE contracts with a notional value of about US$7.5 billion traded in Singapore will shift to India as a cross-border trading link between the two Asian countries’ top bourses gets fully operational on Monday (Jul 3). SGX Nifty, the Singapore Exchange-traded futures on India’s key equity NSE Nifty 50 Index, will be known as Gift Nifty from Jul 3, and all outstanding orders will be transferred to the Gift City, the new financial hub in the western Indian state of Gujarat.

On the verge of a launch by Komoco Motors in Singapore, the Ioniq 6 is a relentlessly streamlined sedan that has a habit of picking up accolades, among them the prestigious World Car Of The Year Award. As a product, it signals Hyundai’s confidence in its ability to compete head-on with the likes of BMW and Tesla; respectively, the Ioniq 6 takes direct aim at those brands’ i4 and Model 3, full electric cars that prioritise performance and style.


THE dollar index was lower on Friday (Jun 30) following two straight days of gains, after economic data showed a cooling in consumer spending, raising some doubt about the potential aggressiveness of the Federal Reserve in fighting inflation. US Treasury yields were also mostly lower after the data.

NETFLIX, Walt Disney and Hollywood’s other major film and television studios were racing against a midnight deadline on Friday (Jun 30) to reach a deal with the SAG-AFTRA actors union and avert a second labor strike this summer. A strike by SAG-AFTRA, which represents 160,000 actors, would add pressure to studios already grappling with a nearly two-month work stoppage by the Writers Guild of America (WGA).

UNITED Airlines canceled 751 flights on Wednesday (Jun 28), more than any other airline, and its hub airport in Denver was among the hardest hit. Unfavorable weather caused more delays than usual at US airports in the past week, and possible storms are forecast for the midsection of the country ahead of the July 4 holiday. United had canceled 8 per cent of its flights as of Friday evening and delayed 41 per cent, data from FlightAware.com indicated.

TESLA on Sunday (Jul 2) said it delivered a record number of vehicles in the second quarter, topping market estimates as price cuts and US federal credits helped make its electric vehicles (EVs) more affordable. Tesla is expected to hit record sales in China, its second-largest market after North America, despite stiff competition from market leader BYD.

Source: SGX Masnet, Bloomberg, Channel NewsAsia, Reuters, CNBC, WSJ, The Business Times, PSR


Phillip 3Q23 Singapore Strategy – Slower for longer

Analyst: Paul Chew

– Singapore’s equity market drifted downwards in 2Q23 with a decline of 1.6%.

– Global economy faces two headwinds , limited progress in taming core inflation and higher rates will only exacerbate the current weak economic conditions.

– We adopt a defensive posture on Singapore equities focusing on dividend yields. We expect banks dividends to still grow this year and the current yield of Singapore REITs to remain attractive.

Singapore Banking Monthly – Singapore interest rates remain flattish

Recommendation: Overweight (Maintained)

Analyst: Glenn Thum

– June’s 3M-SORA was up 3bps MoM to 3.64% and 3M-HIBOR was up 43bps MoM to 4.84%.

– Singapore domestic loans dipped 4.88% YoY in May, below our estimates. The loan decline has slightly reversed from the previous month. CASA balance is flat at 18.8% (Apr23: 18.8%), the first in 14 months.

Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates (SGX SP, BUY, TP S$11.71).

Property Sector – Lentor Hill Residence, living with the nature

Recommendation: non rated

Analyst: Liu Miaomiao

– The selling price (psf) of Lentor Hills Residence start from c.S$1850 compared with the sister project Lentor Modern of S$2100 (launched in Sep22, the 604 unit project was 84% sold over the launch weekend). We attribute the price difference to the higher construction cost of the latter project and its direct access to the shopping mall and the MRT. July is usually a busy month for new launches as May is known to be the exam month and school holidays are in June. We believe this month is critical for the development given several concurrent projects launches such as Myst by CDL, Lake Garden Residence by Wing Tai Holdings Limited and Pinetree Hill by UO

– The combined potential supply from the seven plots the in Lentor Hill estate exceed 3,400 housing units. We expect the demand to come from HDB upgraders from the nearby North-East and North. Leveraging on the convenient Lentor MRT station on the Thomson-East Coast Line (TEL), future greenery of Lentor Hillock Park and accessibility to educational institutions. GuocoLand enjoys competitive advantage as the biggest developer in this area. The project is also able to price a premium over the typical suburban mass-market condo as it surrounded by private residences and lush greenery.

– With the expected TOP in 2027 of Lentor Hill Residence, 2028 of Lentor Hill Garden, the relatively fast completion of new projects will also prevent the area from becoming a perpetual construction site.

– To cope with the surging demand in the rental market, the dual key concept for 3 or 4 bedder is available in Lentor Hills Residence. However, we still expect the 2 bedder dumbbell designed condo to receive the most demand.

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