Equity investors expecting a big boost for Singapore’s benchmark index from its upcoming annual budget could be disappointed: heavyweight blue chips are unlikely to benefit from government largesse.
Aimed at reversing the nation’s worst economic contraction since it became independent in 1965, Feb 16’s budget is set to focus on the pandemic-hit travel sector or firms with mandates in line with green or digital initiatives, say analysts.
That’s bad news for the benchmark Straits Times Index, which has risen 2.9% so far this year. The gauge has significantly underperformed the broader MSCI Asia Pacific Index even though Singapore has managed to contain the spread of the virus.
“The upcoming budget is unlikely to be a game changer,” said Kee Yan Yeo, analyst at DBS Group Holdings.
Government proposals will likely focus on struggling aviation and tourism sectors, or companies seeking to expand, digitise or invest in new technologies like 5G, rather than spurring growth in real estate and banks — which dominate the benchmark, Yeo said.
Here are the sectors to watch:
The aviation sector will likely get more government support through wage subsidies and cost-relief measures since Singapore’s borders remain largely closed, according to DBS, Phillip Securities and Maybank Kim Eng Securities currently allows tourists from only a handful of countries such as Australia, mainland China and Taiwan.
The Jobs Support Scheme, a wage subsidy plan put in place last year to cushion the damage from the coronavirus pandemic, will likely be sustained, DBS’ Yeo said. That means flag carrier Singapore Airlines Ltd., airline caterer SATS Ltd. and aircraft-equipment maker SIA Engineering Co. could gain, he added.
Job support programs like wage subsidies could also provide a lifeline for restaurants and other tourism plays, said Thilan Wickramasinghe, Maybank’s head of Singapore research.
Among stocks to watch: restaurant operators No Signboard Holdings Ltd. and Jumbo Group Ltd., casino stock Genting Singapore Ltd. and luxury hotel group Mandarin Oriental International Ltd.
ESG and Tech
Companies with a sustainability focus or linked to 5G, urban solutions and artificial intelligence should also gain from Singapore’s goal to be a green hub and a tech-focused Smart Nation. Watch ST Engineering Ltd., DBS said.
Property and Banks
Commercial landlords may no longer benefit from loan covenant waivers and other measures in exchange for giving their tenants relief. They remain vulnerable due to extended work-from-home arrangements and the lack of tourism. Watch CapitaLand Ltd., City Developments Ltd. and Mapletree Commercial Trust among others.
Businesses benefiting from increased internet usage during the pandemic such as data centers, and companies like financial institutions with easy access to funding are also unlikely to get significant incentives, said Carmen Lee, head of investment research at Oversea-Chinese Banking Corp.
DBS and Phillip Securities say an organic pickup in retail sales is reducing the need for continued wage subsidies. Cash handouts and vouchers for households that benefited supermarket operator Sheng Siong Group Ltd. “would be absent in this budget,” said Paul Chew, Phillip Securities’ Singapore head of research.