DBS Stock Pulse: (1) Bracing for President Trump and possible ‘red sweep’ (2) Equity picks – Reassessing for Trump 2.0
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Group Research - Equities7 Nov 2024
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Market View Update

Bracing for President Trump and possible ‘red sweep’


Stocks to watch on President Trump policies

Policies

Implication for US stocks

Implication for SG stocks

Lower taxes and regulations

- Higher corporate earnings on lower tax is positive for US markets, and could attract more inflows

- Lesser regulations positive for banking sector (e.g. JP Morgan)

- Negative for regional equity markets, with possible outflows

- STI should hold firm in the near-term underpinned by banks, but market breadth likely mixed at best

Preference for conventional energy over renewables

- Positive for conventional energy stocks (ExxonMobil, EOG Resourcses)

- Possible Inflation Reduction Act rollback negative for renewables and utilities (Brooksfield, NextEra)

- Capped oil prices on higher oil production benefit transport stocks ComfortDelGro and SIA

- Seatrium’s US facilities (in Brownsville, Texas) to ride on conventional and renewable energy initiatives

Stronger USD and higher yields on expansionary and inflationary policies

- Currency headwinds persist for companies with major overseas exposure like Coca Cola and Colgate-Palmolive

 

- Higher volatility for REITs; retail and industrials sub-sectors may offer more resilience

- Banks (top pick UOB) to hold up as long-end yields remain high

- Strong USD is positive for Yangzijiang, Venture

Reshoring efforts with potential tariffs and trade war

- Positive for companies with strong domestic markets and/or supply chain (e.g., automakers Ford, GM)

- Negative for retailers that are dependent on imports, especially from China (Nike, Target)

- Higher volatility on tech stocks on more trade restrictions and tariffs

- US reshoring should benefit SATS-WFS, ST Engineering-Transcore

- 60% blanket tariffs on imports from China to weigh on shipping stocks (e.g., HPH Trust)

- Increased traction for China+1 diversification, positive for Venture, Frencken

Higher market volatility for SG stocks

-

- SGX benefits from higher trading activity on market volatility

- Potential shelter in Sheng Siongv, Singtel on resilient and steady earnings base

Source: DBS

  • Implications of Trump’s presidency, with increasing odds of a Republican ‘red sweep’

- Republicans have control over the Senate, with outcome of the House still unclear at this juncture

- Implications will be more pronounced under a ‘red sweep’ scenario, as President Trump has free rein to push through most policies

  • For Singapore, while the STI should hold firm and even trend up in the near-term due to rotation into index heavyweight banks amid slower pace of rate cuts or even a return of high-for-longer rates narrative, the broader market breadth will likely be mixed at best as investors reposition for possible winners/losers of Trump 2.0
  • Banks to outperform REITs, Fed funds futures currently anticipates just 4 more cuts between now to end-2025, down from 6 cuts a month ago
  • 2 possible winners within industrials – 1) stocks with US exposures to ride on reshoring efforts, and 2) transportation stocks on capped oil prices
  • China+1 diversification theme may see added traction on potential escalation in trade tensions
  • Defensive stocks may feature favourably amidst heightened market volatility

 

Singapore Equity Picks

We make the following changes to address the US election outcome with Trump 2.0, which we think will be characterised by trade war and possibly slower rate cuts.

UOB: Increase 200 shares @ SGD32.69

We raise exposure to factor a slower pace of rate cuts. The Fed should still cut rates but proceed at a slower pace. With the addition, there are now 900 UOB shares at an amalgamated price of SGD32.1


SPDR STI ETF: Add 8,000 shares @ SGD3.68

With banks taking up 51% weight of the STI, this ETF offers exposure to the banking sector that could outperform in the near-term.

REITs- We had already pared exposure by removing MPACT and FLT recently at higher levels than current prices. We keep our exposure on CLAR and SGREIT as we monitor the outcome of the FOMC meeting and Fed commentary tonight.

Industrials – We currently have SATS and ST Engineering that can benefit from possible reshoring efforts back into US. We also have ComfortDelgro that can benefit from a potential cap to oil price.

China + 1 – We have Venture Corp in Equity Picks.


Stocks to Watch

Frasers Logistics & Commercial Trust – TP (-)

Acquisitions key to earnings growth

  • Slight miss in FY24 DPU estimates due mainly to payment of 100% of 2H24 manager’s fees in cash
  • Portfolio operating metrics remain relatively stable and continued rental growth will drive earnings
  • Acquired maiden Singapore logistics property; ample debt headroom for further accretive acquisitions
  • Maintain BUY with lower TP of SGD1.30

 

Legend

 

(+)

(-)

Earnings

Positive earnings revision

Negative earnings revision

Recommendation

Upgrade

Downgrade

TP

Increase

Decrease

 





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Note: All views expressed are current as at the stated date of publication.
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