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Although REIT IPO fails to lift SGX, price attempts to bottom

Goola Warden
Goola Warden • 3 min read
Although REIT IPO fails to lift SGX, price attempts to bottom
The new REIT IPO has failed to lift the SGX out of its doldrums, but the soon to be listed SPACs could revive interest.
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Finally, the Singapore Exchange (SGX) will get an IPO in the form of Daiwa House Logistics Trust. The IPO’s market cap is around $540 million, which is small for an S-REIT. However, with the regulatory framework ready for potential listings of special purpose acquisition companies (SPACs), we could see more IPOs, which could revive the fortunes of SGX which has suffered from a dearth of IPOs.

For the time being though, the chart of the SGX looks pretty dismal at first glance. Its share price has been under pressure since August,when the Hong Kong Exchange and Clearing (HKEX) announced it would be launching a futures contract based on the MSCI China A 50 Connect Index. HKEX’s share price, although up 26% y-o-y, is up just 4% this year. After a temporary rebound in September, the HKEX continued to languish.

Unfortunately, the SGX — which investors perceived to be at the losing end of the new contract, given that the FTSE China A50 futures is a significant contributor to revenue — has also languished. The SGX’s share price broke below support at the $9.98 to $10 level on Sept 30 and has spent the past five to six weeks moving to $9.47 before rebounding. Based on the chart pattern, the declining 50-day moving average is acting as a resistance line.

On a positive note, there has been a series of positive divergences between price and its oscillators. However, smoothed RSI remains below its equilibrium line, in negative territory. For strength to return, this indicator needs to break above its equilibrium, and this may only materialise if prices can move above the 50-day moving average. While the moving average is at $9.80 currently, a break above this resistance line can materialise as it falls toward $9.60, which is likely over the next few weeks. In the meantime, SGX needs to hold at $9.47 to build a base. Interestingly, the FTSE China A50 futures contract in Singapore still has more volume than HKEX’s China A 50 Connect Index futures contract.

iFAST Corp’s chart pattern looks quite straightforward at present. Its share price appears to have broken below what is turning out to be a double top. The neckline is at $8.98 to $9.00. This is likely to be a resistance level. The breakdown indicates an initial downside of $7.80 which is also a support level. iFAST has broken below both its 50-day and 100-day moving averages, and the still-rising 200-day moving average is currently at $7.68.

Momentum indicators confirm a breakdown by iFAST. Smoothed RSI formed a series of negative divergences before falling below its equilibrium line, suggesting that prices could head lower. At the very best, iFAST’s share price could just languish and drift sideways. The 200-day moving average should provide some form of support until it is breached.

See also: STI and REIT indices have further upside after current retreat

On a positive note, Singapore Press Holdings (SPH), is at its highest in almost two years. SPH used to trade at the $2.90 to $3 level and was hanging around here when SPH’s current CEO Ng Yat Chung was appointed. Since then, the share price fell continuously — to a low of 99 cents about a year ago.

The Keppel Corp offer for the stock triggered a rebound, but prices had been a lot higher in 2017 and 2018. The competing Cucaden Peak offer for SPH, while modest, helped to boost prices a bit more.

Will SPH get back to its pre-current CEO trading price? That appears unlikely, but we will know soon enough.

See also: Are S-REITs set for a re-rating following REIT index breakout?

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