#whatstrending feat. Phillip Securities (a member of PhillipCapital)

Ever wondered what is currently driving the local and regional markets? #whatstrending is a new series addressing some of the most trending questions/topics on the markets for investors. Designed to be educational, expect to get factual information on what is driving sectors and stocks listed on SGX, featuring insights from professionals in the community.

Today, we hear more from Phillip Securities’ Dan Chang, Trading Representative/Remisier and SGX Academy Speaker, as he shares his thoughts and views on what he is most excited about in 2024. 

Q:  How is the economic environment as we step into 2024?

From Dan Chang, Trading Representative/Remisier at Phillip Securities:

Stepping into the year 2024, we might possibly see a “tale of two halves.” Based on the global market movement and news flow that we have seen in the past few weeks, the market expectation is that the present rate hikes cycle might finally be in our rear-view mirror. In fact, the market is already starting to talk about rate cuts in 2024.

However, before we come to that, we might see some cautiousness in the market in the first half of 2024 as there are still some speedbumps to look out for. The Ukraine-Russia war is still ongoing. The Gaza Strip conflict is still a concern despite a temporary truce. China’s economy, which is the second largest in the world, is still trying to recover. Recently, there are some reports on a surge in acute respiratory illness affecting children spreading in China. While WHO has played down the seriousness, it is always good to be cautious and take note of that situation.

If everything “goes as what the market is expecting,” we might possibly see a rate cut in the second half of 2024, which might be beneficial to rate-sensitive sectors like REITs and property developers. Of course, that said, it really depends on when or whether we will see any resolutions in the Ukraine-Russia war and the Middle East conflict, as well as what transpired in the China healthcare situation.

Q:  What are some trends and drivers affecting the Singapore market that we can look out for?

From Dan Chang, Trading Representative/Remisier at Phillip Securities:

Specifically in the Singapore market, there are a few things / events to look out for. First, it is good to closely monitor the surge in acute respiratory illness cases in China. Surely, we won’t want a repetition of the Covid-19 situation in 2021. Investors are encouraged to stay nimble and keep abreast of the situation.

Second, our strong Singapore Dollar might be a tripping stone for some of the listed companies, especially those with global and/or regional presences as it might potentially translate to forex losses for these companies if there isn’t a good hedging system in place.

On the bright side, a highly anticipated rate cut in 2024 is likely to bring some reprieve to REITs and companies with substantial borrowing (especially growth companies). A lower cost of borrowing will also bode well for companies who are capital-intensive (property developers) and could also potentially encourage companies to take on more profitable investment opportunities.

A key event to look out for in Singapore is the Singapore Government transition, in which Prime Minister Lee Hsien Loong has publicly revealed that he will hand over the reins to Deputy Prime Minister Lawrence Wong before the next General Election, and by November 2024 “if all goes well.” This might possibly bring some positive vibes to the Singapore market.

Q:  Which sector are you most excited about in 2024?

From Dan Chang, Trading Representative/Remisier at Phillip Securities:

The sector that I am most excited for in 2024 would have to be the Singapore REITs sector. S-REITs have had a challenging period for most of 2023. It wasn’t until Nov 2023 where we started to see a strong rebound, with the iEdge S-REIT index registering its strongest monthly total return gain (+7.4%) since 2020.

Coming off a low base, I think there are attractive investment opportunities in this sector, especially in the more established REITs such as CapitaLand Integrated Commercial Trust, Mapletree Industrial Trust, and Keppel REIT, etc. Aside from REITs, there are also some Business Trusts such as Keppel Infrastructure Trust, which could provide exposure into recession-defensive infrastructure assets.
Another sector that I will be looking out for would be the technology sector. While there aren’t any really big chipmakers listed in Singapore, we do have companies that are suppliers to big tech companies. Three of them would be AEM, who supply chip-testing solutions to Intel. There is also UMS, which is a supplier to Applied Materials, and Frencken, which counts ASML as one of its biggest customers. With the Artificial Intelligence (AI) theme looking to continue to play out, it might bode well for the tech companies listed on SGX.

For more insights from Dan Chang, join his telegram channel here [t.me]

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