Singapore Market Focus - DBS Research 2022-10-27: Navigating Between Recession Fears & Slower Rate Hikes

Singapore Market Focus - Navigating Between Recession Fears & Slower Rate Hikes

  • Against the backdrop of edging recession concerns and slower rate hikes, we see STI near-term support at 2,923 with the rebound cap at 3,090. We see potential for rebound trade or bottom fishing for “rate hike casualties”.
  • DBS Economics research sees the Fed Funds Rate hitting 4.5% this year and peaking at 5% in 1Q23, which is in line with the consensus view. The upcoming 2 Nov FOMC meeting will likely mark the last 75bps hike in the series. Singapore’s 2023 GDP growth is cut to 2.2% (previously 3%).

5 recession-resilient S-REITs to accumulate.

3 SGX listed non-REITs for possible rebound trade.

  • UOL Group (SGX:U14) rides on Singapore’s resilient residential property market, while its hospitality and retail segments benefit from reopening. The stock trades at close to its GFC low of 0.5x P/B and net debt/equity is a low 0.2x.
  • ComfortDelGro (SGX:C52)’s huge mismatch between its share price performance and improving fundamentals is an opportunity. EPS growth is at double digits y-o-y, at 27% and 35% for FY22F and FY23F, respectively. Valuation is very attractive at < 1x P/BV, 12.3x fwd P/E, 2.6x EV/EBITDA, 5.9% FY23F yield, and in a net cash position.
  • Wilmar International (SGX:F34)’s positive 1H22 earnings momentum should sustain into 2H22. Stock is trading at 8.1x FY23F P/E, -2 standard deviation of its 5-year average P/E. Net debt/equity is moderate at 0.7x.

Avoid stocks with negative 52-week low signals.

Semiconductor stocks: Too early to bottom fish despite possibility of oversold bounce

  • While semiconductor stocks AEM (SGX:AWX) and UMS (SGX:558) are oversold following the rapid sell-off in recent weeks and a technical bounce is possible, we’d rather not chase the bounce due to ongoing uncertainties from the slowdown in consumer demand and the recent US export controls on advanced chips/chipmaking equipment from China. The figures are tell-tale signs, with September the second consecutive month of contraction in NODX electronics exports.
  • The full extent and impact of US export controls to China have yet to be fully understood, with a bias towards the downside. China is a key market for most US semiconductor companies, having contributed an average of ~30% to their revenue in the last financial year. As a result, AEM and UMS may be affected as Intel and Applied Materials mull over further production and/or CAPEX cuts.
  • We see technical resistance for UMS Share Price at $0.97 and $1.02 and AEM Share Price at $3.34 and $3.46.

3 stocks most affected by China’s continued zero-COVID policies

  • Chinese travellers made up 19% of Singapore visitor arrivals back in 2019. Any delay in the easing of China’s zero-COVID policy will cause a corresponding delay in Singapore’s tourist arrivals recovering to the pre-COVID level. Genting Singapore (SGX:G13) may be affected by the continued absence of Chinese high rollers in the foreseeable future. Genting Singapore's share price may be capped at $0.835 technical resistance for now, despite it being a beneficiary of Singapore’s reopening theme.
  • Among the China-focused retail S-REITs, we see little downside for CapitaLand China Trust (SGX:AU8U) as it seems to have priced in the negatives, while Sasseur REIT (SGX:CRPU) risks being affected by debt refinancing. CapitaLand China Trust's share price trades at an attractive FY23F 9.2% yield.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

YEO Kee Yan CMT DBS Group Research | Janice CHUA DBS Research | 2022-10-27
SGX Stock Analyst Report BUY MAINTAIN BUY 6.670 SAME 6.670

Read also DBS Research's most recent report:
2022-03-01 UOL Group - Riding On Office Tailwinds

Relevant links:
UOL Group Analyst Report,
UOL Group Target Price,

UOL Group Share Price History,
UOL Group Announcements,
UOL Group Dividends/ Corp Actions,
UOL Group News Articles


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