Singapore Market Strategy - Maybank Research 2024-06-05: Rate Expectations Have Changed; SG Should Benefit. Rotating In.

• Expectations of five-to-six Fed rate cuts in early-2024 is being replaced by two-to-no-cuts. This should bring Singapore’s defensive and low-gearing characteristics back in favour.
• 1Q24 shows downgrades are bottoming, while earnings have upside surprise potential.
• Medium term themes of corporate restructuring, JB-SG SEZ, decarbonisation and AI are additional catalysts.

1Q24 shows bottoming downgrades

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• Forecast earnings downgrades fell to 17% in contrast to the REIT-led 43% in 4Q23. Rating remains largely unchanged. We think these all point to expectations bottoming out, giving greater confidence in the 2024E STI earnings growth forecast of 5.6% y-o-y – an upgrade from 4% at the start of the year.

Rate expectations have changed

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• The Financials have been leading the charge from expectations of defensible net interest income from a higher-for-longer interest rate scenario. Also improving returns expectations from Telco restructuring is also starting to take hold.
• We believe that Singapore’s defensive capabilities and the demonstration of its ability to pass on higher operating costs and preserve margins should catalyse a rotation of investor flows back to the country from more growth oriented markets.

Material institutional inflows so far in 2024

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Thilan Wickramasinghe Maybank Research | https://www.maybank-ke.com.sg/ 2024-06-05 SGinvestors.io

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