As Prime Minister Lee Hsien Loong announced on Dec 14 that the country will be entering Phase 3 of reopening from Dec 28, CGS-CIMB Research analyst Lim Siew Khee says there are still positive implications to the equity market even though the changes in Phase 3 were already expected.


See: Singapore to move to Phase 3 on Dec 28, gatherings of up to 8 people allowed


This, she says, is due to the firm timeline of the deployment of the Covid-19 vaccine.

The increased gathering sizes to eight from five will benefit counters such as Jumbo and Koufu, Lim notes.

An increase in premise capacity will also bode a slight positive for retail REITs and attractions, she adds. “HRNET is likely to see an increase in staffing needs in the retail, consumer and hospitality sectors, with the expected increase in local customers (supplemented in part by Singapore Rediscovers vouchers) as overseas travel remains curtailed.”

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As more of Singapore gets vaccinated, other countries will be more amenable to allow their citizens to travel to Singapore, which would have positive effects on the retail and hospitality industries, especially if Singapore becomes one of the few ‘safe’ destinations to travel to.

“Beneficiaries of a potential boost to freight: SATS (specialised cold chain facilities) and SIA, as Singapore could benefit from being a vaccine distribution hub due to the specialised handling requirements of the Pfizer vaccine,” says Lim.

Looking towards 2021F, Lim says she remains aware that the Covid-19 pandemic still holds an “outsized impact” on economic growth in the next financial year.

“We are positive on good value structural plays (banks, construction and property) as the world adapts to post-Covid times,” she says.

“We keep our end-2021F Straits Times Index (FSSTI) target at 3,068 pts, based on 14.2x forward P/E (10-year historical mean),” she adds.

For RHB analyst Shekhar Jaiswal, the rising market optimism comes with some risks.

In 2021, Jaiswal says he expects the STI to rise, reversing its underperformance relative to Asian peers in 2021.

This, he says, is due to “increasing optimism around improvement in economic activity, sustained improvement in private consumption, strong improvement in business confidence as vaccines become available in late 2H2021, and greater investor participation amidst a return of funds flow to Asia”.

Jaiswal also predicts that Singapore should deliver 5.5% GDP growth in 2021 underpinned by easy monetary policy, overflowing benefits from the fiscal stimulus announced in 2020 and gradual reopening of the economy as domestic COVID-19 pandemic remains under control.

“We expect private consumption to continue improving and business confidence to turn positive closer to vaccine availability. This should translate to strong profit growth and improved investor sentiment,” he says.


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To this end, Jaiswal expects the first earnings upgrades to come in amid signs of strong earnings growth.

“Expectations of GDP growth over the next 12 months should be positive for STI as the index’s forward earnings per share (EPS) growth and returns are closely correlated with Singapore’s GDP growth,” he notes.

“In addition, 3Q2020 earnings/business updates offered hope that Street has been too conservative on the STI’s earnings outlook. STI’s 12-month forward EPS estimate has been lifted by 5% since end Sep-2020. Street has pencilled in 39% profit growth for STI in 2021. Earlier-than-expected vaccine availability could boost growth further.”

At 13.8x 2021F P/E, STI is the cheapest market in ASEAN. Its 4.1% 2021F yield is the highest in Asia. Persistence of almost-zero interest rate, elevated global liquidity and reversal of funds flow to Asia should bring investors to high-yield markets like Singapore. Our end-2021F STI target of 3,144 pts is based on a 13.5x forward P/E,” he adds.

Jaiswal has rated “overweight” on the consumer, gloves, industrials, land transport, manufacturing and technology, real estate and REITs sectors, and “neutral” on commodities, financials, gaming and telecommunications.