Market View Update
Stay nimble as STI nears 3780 resistance
Stand ready to take profit on stocks that have done very well and stay tactically nimble to react to changes to evolving tariff newsflow
- We see limited upside following STI’s 350pts rally over the past 10 days
- Our call on 10 April for the 90-day tariff pause to trigger a big snap-back rally off STI 3372 low has panned out well, breaking initial resistance at 3635 and tested the next resistance at 3727
- We now see further near-term upside capped at 3780, which is not far off the 3820 (start of 7 April big downside gap) major resistance
- Support levels at 3580, 3430
- We reiterate our earlier view of limited upside for defensive STI component stocks (e.g., Singtel, ST Eng, SGX) given their recent outperformance
- Monitor tariffs newsflow closely and be ready to capitalise on oversold ‘tariffs casualties’, IF tariff news flow improves ahead
- Stocks with China exposure e.g., MLT, Yangzijiang, HPHT would benefit the most, if US and China leaders begin talks to de-escalate current tensions
- Tech stocks that are more insulated given local-for-local-operations, e.g., UMS, Grand Venture, Frencken, watch Venture if a Malaysia-US tariffs deal materialises and the initial 24% reciprocal tariff is lowered
- Oversold names with attractive earnings growth outlook, e.g., Seatrium, IFAST, underpinned by robust orderbook and ePension business, respectively
Singapore Equity Picks
SingTel: Remove from Blue Chips at SGD3.75
SingTel shares strongly outperformed the benchmark over the past 2 weeks on a ‘flight to safety’ trade. Stock is up 6.8% versus STI’s 5.9% decline since 3 April. The rally has pulled dividend yield for FY25F and FY26F down to 4.4% and 4.76% respectively. Upside to our analyst’s TP of SGD3.93 is similarly reduced to 4.8%, even lesser at 2.1% for Bloomberg’s consensus fair value at SGD3.83. Shares removed have returned 16%.
Trending Sector
Global stocks
Last hurrah before the tariff squeeze?
- Retail rush may signal pre-tariff demand pull-forward
- US retail sales surged 1.4%m/m (+0.5% m/m ex-auto) in March, the fastest pace in over two years, driven by a scramble to front-load big-ticket purchases
- Auto sales led the surge (+5.7%), but the strength was broadbased, with gains recorded in 11 out of 13 categories including electronics and building materials, and sporting goods
- Short-term sales strength could mask looming softness on macro uncertainties
- Expect sales normalisation going forward as front-loaded demand fades and tariffs weigh on affordability, particularly for demand-sensitive categories
- Reinforce call to be selective across sectors and stocks
- Stay cautious on automotive stocks with higher tariff exposure (General Motors, Honda)
- Underweight luxury, especially brands targeting the mass affluent (Kering)
- Prefer stocks with higher exposure to consumer staples (Walmart > Target)
- Overweight utilities for more stable earnings outlook (Duke Energy)
Singapore REITs
Triggering the first C-REIT listing
- Proposed inaugural China REIT (C-REIT) seeded by assets within the group’s ecosystem
- CLI, CLCT, and CLD to collectively own 20% in the new C-REIT, with a listing horizon of one year
- CLI deserves praise for its continued pursuit of FUM growth, tapping a growing pool of onshore capital in China
- Questions may initially arise on CLCT’s viability and strategy going forward, but the REIT could tap onshore recycling opportunities over time, attracting international capital looking to deploy into China; thus, steep discount to book unwarranted
Stocks to Watch
Yangzijiang
USTR’s scaled-back port fees proposal eases concerns
- USTR scales back port fee plan, with new proposed tonnage-based per voyage structure at much lower rates
- Eases concerns on order cancellation or future ordering at Chinese shipyards; Korea/Japan shipyards stand to benefit with preference over Chinese-built. Though, other factors such as delivery slot availability, price premium etc will remain in play
- Expect further consolidation amongst Chinese shipbuilders with higher order concentration at top yards like Yangzijiang
- Yangzijiang has wide economic moat to weather through near-term uncertainties and potential structural shift; reiterate BUY and TP SGD3.80
Legend
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