Singapore markets experienced a gloomy 2Q20 as the Straits Times Index (STI) closed August flat at 2,532.51 pts. This represented a marginal 2.7 pts increase m-o-m as investors were sombre amid gloomy economic data and poor visibility due to the Covid-19 pandemic. 

GDP for the quarter contracted 13.2% y-o-y, a disappointment compared to both house and consensus forecasts. The cause for this pessimism was weaker manufacturing (-0.7% y-o-y) and construction (-59.3% y-o-y) activity. The circuit breaker was particularly damaging for transport (-39.4% y-o-y) and retail trade and business services (-13.4%), while weak job security saw consumers tighten their purse strings, with private consumption down 28.8%. 

While there was some cause for optimism as non-domestic oil exports rose 6% y-o-y versus consensus estimates of 4.2% y-o-y, total volume of trade fell 8.9% y-o-y as total exports and imports fell. Non-electronic exports rose 6.9% as pharmaceutical exports offset a drop in petrochemical demand. August earnings releases continued July’s dour note, with earnings disappointments overshadowing surprises by a ratio of 3:1. 

“1H20 private home prices (URA data) fell 0.6%; dragged by declines in the Outside Central Region (-2.2%) and Rest of Central Region (-0.3%), while the Core Central Region managed a small 0.4% increase,” write CGS-CIMB analysts Lim Siew Khee and Jeremy Ng Choon Heng in a broker’s report yesterday.  Primary home sales for July were 8.2% higher m-o-m, but down 8.4% y-o-y, with 1,142 units sold.

The silver lining was the government’s continued commitment to fiscal stimulus to prop up the Singapore economy. It committed an additional $8 billion for job retention and creation, extending the wage subsidy (JSS) for another seven months till March 2021. 

The top performing sectors for August were tech, utilities and consumer services while telcos and healthcare underperformed, as did oil and gas due to weakened global demand. Institutional investors have persisted with their broad-based selling and accumulation in tech, with industrials, consumer and telcos most heavily sold down. Retail participation in the stock market remained strong, with the biggest inflows into financial services, industrials and telcos.

“The top index performers for Aug were Venture Corp (strong results), while SATS and ComfortDelGro rebounded as ‘the worst is believed to be over’, while Keppel Corp (Temasek bid scrapped), ST Engineering (poor results) and Mapletree Industrial Trust (sale of prime assets) brought up the rear. In the mid-large-cap space, Medtecs International (strong results), Zheneng Jinjiang Environment and Mandarin Oriental International were the best performers, while the worst performers were Keppel Corp, Golden Agri-Resources (poor results, despite rising crude palm oil prices), and Sinarmas Land,” say the two analysts. 

Technical analysis yielded little good news, with the flat STI leaving the ongoing downtrend in control. A bearish break below the uptrend line since July signals further downside to come as charts conform to a head and shoulders pattern. Further weakness was hinted at by a bearish rejection near the STI’s 20- and 60-day moving average in August, effectively forming new lower high (LH) points.

“Therefore, with the downtrend still intact and the bearish momentum gaining strength, there is a high likelihood of seeing a break below the 2,500 support in the coming weeks,” warn Ng and Lim. A break below the 2500 support, they caution, could trigger a new wave of sell-offs with bears targeting the 2300-2400 support area. On the upside, however, the 2600 resistance area will likely prove to be the STI’s ceiling in the near term. 

As of 4.20pm today, the STI is 5.04 points up at 2,537.55.