Towards Financial Freedom
DBS Equity Research: Wired Daily 4 Jan 2016
Capricorn rally likely short-lived ¡V STI near-term bounce capped at 2950, weakness towards 2650-2700 over next 1-2 mths a good opportunity to accumulate
Singapore 4Q GDP beats forecast with 2% y-o-y growth
A return to normal trading activity should lift stock prices higher as the New Year begins. However, we maintain our view that any attempt at a 'Capricorn Rally' will be shortlived or unsuccessful. The shadow of higher interest rates, risk of more earnings disappointments during the 4QFY15 results season and the uncertain 2016 growth outlook continues to be a near term drag for equities. Furthermore, history has shown that the initial 1-3 months would be negative for equities once the Fed starts its rate hike cycle. We see technical resistances at 2905 and 2950 capping near-term upside.
But a decline closer to 2650-2700 during the initial 1-2 months of the year is a good accumulate opportunity. This is because 1) Singapore market valuation is inexpensive, 2) history shows the inflexion point for the negative stock market reaction off the initial US rate hike is within a 3-mth period, and 3) period from mid-March till end-April is traditionally positive for equities as investors position ahead of stocks going ex-dividend.
O&M stocks should be underpinned by the rebound in oil price on the rapid build up in Middle East tensions. Saudi Arabia cuts diplomatic ties with Iran after angry protestors ransacked its embassy in Tehran to protest the execution of a Shiite cleric.
The Singapore economy grew at a better-than-expected 2% y-o-y in the last quarter of 2015, advanced estimates show, and is expected to register a full-year growth of 2.1% in 2015. The market is expecting 1.3% in the fourth quarter from a year earlier. The growth was also slightly better than the third quarter's 1.8%, and on a quarter-on-quarter seasonally adjusted annualised basis, the economy expanded at a faster pace of 5.7% compared to the 1.7% growth in the preceding quarter. The construction and services sectors both registered growth on a y-o-y basis, while manufacturing continued to contract.
Yoma Strategic Holdings announce that a framework agreement has been signed with the Ministry of Rail Transport (MR) of Myanmar in relation to the Landmark Development project. The master lease for the Landmark Development project has been extended for an initial period of 50 years commencing on 1st January 1998. Located at the heart of the downtown Yangon business district, the Group's iconic Landmark Project will host the former headquarters of the Myanmar Railway Company built in 1877 which will be restored into the Yangon Peninsula Hotel, and complemented by luxury residences, hotel and commercial developments.
Sin Heng Heavy Machinery has been awarded the distributorship of the Grove range of all-terrain cranes for Indonesia with effect from 1 January 2016. As part of the distributorship agreement, the Group will also provide aftersales service and parts in Indonesia. Moving forward, Sin Heng intends to bring in several Grove models with different capacities and specifications so as to broaden its product range and cater to customers' requirements.
On property news, Lawrence Wong, National Development Minister, mentioned that the property market is "on track for a soft landing", but it is still not time to unwind cooling measures. DBS' thoughts: In a calibrated correction in the property market where average prices (measured by the Property Price index) have only dropped by c.9% from the peak in 3Q13 (and c. 5% in 2015), we believe that it is still too early for any unwinding of any policy measures, especially if the liquidity environment remains strong in Asia. An early unwinding could lead to unintended hikes in prices. With uncertainties stemming from the momentum of FED rate hikes and its impact on interest rates, mortgages and prices, we believe that price declines of 15%-20% could warrant the government to review certain anti-speculation measures like the additional buyer stamp duties (ABSD) or review mortgage funding ratios.
Source: DBS
Singapore 4Q GDP beats forecast with 2% y-o-y growth
A return to normal trading activity should lift stock prices higher as the New Year begins. However, we maintain our view that any attempt at a 'Capricorn Rally' will be shortlived or unsuccessful. The shadow of higher interest rates, risk of more earnings disappointments during the 4QFY15 results season and the uncertain 2016 growth outlook continues to be a near term drag for equities. Furthermore, history has shown that the initial 1-3 months would be negative for equities once the Fed starts its rate hike cycle. We see technical resistances at 2905 and 2950 capping near-term upside.
But a decline closer to 2650-2700 during the initial 1-2 months of the year is a good accumulate opportunity. This is because 1) Singapore market valuation is inexpensive, 2) history shows the inflexion point for the negative stock market reaction off the initial US rate hike is within a 3-mth period, and 3) period from mid-March till end-April is traditionally positive for equities as investors position ahead of stocks going ex-dividend.
O&M stocks should be underpinned by the rebound in oil price on the rapid build up in Middle East tensions. Saudi Arabia cuts diplomatic ties with Iran after angry protestors ransacked its embassy in Tehran to protest the execution of a Shiite cleric.
The Singapore economy grew at a better-than-expected 2% y-o-y in the last quarter of 2015, advanced estimates show, and is expected to register a full-year growth of 2.1% in 2015. The market is expecting 1.3% in the fourth quarter from a year earlier. The growth was also slightly better than the third quarter's 1.8%, and on a quarter-on-quarter seasonally adjusted annualised basis, the economy expanded at a faster pace of 5.7% compared to the 1.7% growth in the preceding quarter. The construction and services sectors both registered growth on a y-o-y basis, while manufacturing continued to contract.
Yoma Strategic Holdings announce that a framework agreement has been signed with the Ministry of Rail Transport (MR) of Myanmar in relation to the Landmark Development project. The master lease for the Landmark Development project has been extended for an initial period of 50 years commencing on 1st January 1998. Located at the heart of the downtown Yangon business district, the Group's iconic Landmark Project will host the former headquarters of the Myanmar Railway Company built in 1877 which will be restored into the Yangon Peninsula Hotel, and complemented by luxury residences, hotel and commercial developments.
Sin Heng Heavy Machinery has been awarded the distributorship of the Grove range of all-terrain cranes for Indonesia with effect from 1 January 2016. As part of the distributorship agreement, the Group will also provide aftersales service and parts in Indonesia. Moving forward, Sin Heng intends to bring in several Grove models with different capacities and specifications so as to broaden its product range and cater to customers' requirements.
On property news, Lawrence Wong, National Development Minister, mentioned that the property market is "on track for a soft landing", but it is still not time to unwind cooling measures. DBS' thoughts: In a calibrated correction in the property market where average prices (measured by the Property Price index) have only dropped by c.9% from the peak in 3Q13 (and c. 5% in 2015), we believe that it is still too early for any unwinding of any policy measures, especially if the liquidity environment remains strong in Asia. An early unwinding could lead to unintended hikes in prices. With uncertainties stemming from the momentum of FED rate hikes and its impact on interest rates, mortgages and prices, we believe that price declines of 15%-20% could warrant the government to review certain anti-speculation measures like the additional buyer stamp duties (ABSD) or review mortgage funding ratios.
Source: DBS
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