The Singapore market is awakening and the worst of the earnings cuts has passed, say DBS Group Research analysts Yeo Kee Yan and Janice Chua in an Oct 13 report. 

Yeo and Chua note that the benchmark Straits Times Index (STI) is trading at slightly above average price-to-earnings (PE) as the 3Q2020 results season begins. Year-end target is lowered to 2750 (from 2850) at 13.8x (+0.5SD) FY2021F PE. 

US presidential candidate Joe Biden’s average poll score has widened to a 9-point lead over President Trump. “A Biden victory would lift sentiment for Asian and Singapore’s small/open economy as he pledges to end the trade war with EU and reconsider China tariffs,” note Yeo and Chua.

Given that the polls are close, the second and third election debates on Oct 15 and 22 could affect the outcome of the election

The outcome of the first Phase 3 Covid-19 vaccine trials could be this month, with more to follow in coming months. One or more positive outcomes followed shortly by approval for public use will be a major boost for the crippled travel sector.

At least five vaccine makers are looking to produce between 500 million to 1 billion doses by end-2021 if approved. Meanwhile, Singapore will look to reopen its air borders without the 14-day stay-home-notice while guarding against inbound Covid-19 risks.

Yeo and Chua advise to look beyond lacklustre 3Q2020 results and concerns of a second infection wave. Anticipation of full-scale vaccine production next year and the gradual reopening of air space to include general travel going forward bode well for Singapore’s aviation and hospitality sectors, with their picks of Singapore Airlines, SATS, and ST Engineering, hospitality REITs (CDL Hospitality Trust, Far East Hospitality Trust and Ascott Residence Trust), and gaming (Genting).

Singapore’s government is set to release details on Phase 3 transition in coming weeks, write Yeo and Chua, unveiling changes to the reopening timeline, changes to regulations on the size of group gatherings, and the participation of mass events.

Potential beneficiaries include MICE (Suntec REIT) and retail REITs with assets located in the central region (Lendlease REIT, Mapletree Commercial Trust, CapitaLand Mall Trust), office REITs (Keppel REIT) and public transport company ComfortDelGro to benefit as companies target 50% of non-essential workers returning to office, note the analysts. 

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