SINGAPORE (March 6): Upcoming macro events are to drive volatility in markets this month, according to DBS Vickers Securities.

In a Monday report, analysts Janice Chua and Ling Lee Keng project that a likely March Fed rate hike could set the path for a total of four rate hikes this year, while the Dutch parliamentary elections on Mar 15 will set the stage for key elections happening across Europe.

“Keep a watch on far-right populist Dutch Freedom Party, which has called for a Dutch referendum on leaving the EU and is campaigning to stop the alleged ‘Islamisation of the Netherlands,” caution the analysts.

Chua and Ling are also anticipating a short-term pause to the Straits Times Index (STI) rally due to uncertainty over the possible March rate hike.

“The French elections in April may offset optimism that the Singapore economy is turning for the better. We peg a short-term range from 3050 to 3150 and any attempt to break above 3150 will not sustain in the near-term as the 3200 level that coincides with 14.04x (+0.25sd) 12-mth forward PE is a formidable short-term resistance,” they elaborate.

DBS expects this year’s emerging trend of takeover and privatisation deals to continue, and has singled out Venture Corporation, PACC Offshore Services Holdings (POSH) and Mermaid Maritime as  their top “buy” picks for merger and acquisition (M&A) plays with target prices of $11.37, 42 cents and 25 cents respectively.  

Bukit Sembawang, Fu Yu and PEC are unrated, but nonetheless identified as potential M&A targets with the respective target prices of $7.55, 25 cents and 73 cents.

The brokerage also recommends stocks within the oil & gas (O&G) sector such as Sembcorp Industries, Sembcorp Marine (SMM) and Ezion – rated “buy” at price targets of $3.80, $1.78 and 62 cents – to ride on the global economic recovery and inflationary environment, in addition to Mermaid and POSH.

First Resources and Bumitama Agri are the research house’s top crude palm oil (CPO) picks to “buy” within the commodity sector for the same reason, with target prices of $2.15 and 99 cents respectively.

Rising interest rates, however, will be negative for Singapore REITs (SREITs), which the analysts believe will see a dividend distribution fall by about 2.9% with every 1% increase in the interest rate. The STI closed 83 points lower at 3,121.51 on Monday.