• Information Technology (“IT”) was Singapore’s best performing Sector in July, with a 5.3% market capitalisation weighted total return. For the first seven months of 2017, the IT Sector’s indicative return came to 47.7%.

• The 10 largest capitalised stocks of the IT Sector have also averaged a 47.9% total return in the first seven months of 2017, with performances ranging from a 101.0% gain for Hi-P International to a 2.6% gain for GP Industries.

• Over the last seven months, net institutional inflow into the IT Sector totalled +$65.2 million, which was the third highest sectoral net inflow after Financials at +S$2.2 billion, and Real Estate Management & Development at +S$300.9 million.

• In addition to the stocks that represent the IT Sector, there are a number of stocks that have IT exposure - two examples include two of July’s debutants - NetLink NBN Trust and Y Ventures Group.

Singapore’s Information Technology (“IT”) Sector maintains a combined market capitalisation of $12.6 billion, with Venture Corporation (“Venture”) being the largest  stock of the sector. For the first seven months of 2017, the IT Sector’s indicative capitalisation-weighted total return came to 47.7%. By comparison the Straits Times Index (STI) had generated a total return of 17.6% over the first seven months of 2017.

First 7 Months of 2017 Indicative Sector Total Returns (%)

Source: SGX, Bloomberg (Data as of 31 July 2017), Note Sector Returns are weighted to market capitalisation at 31 July 2017.

The next best performing segments of Singapore’s stock market were the Materials Sector and Real Estate Management & Development Sector. Like the IT Sector, these sectors are deemed to be more cyclical than defensive.

Sector Rotation in Play Over The Past 12 Months

IT was also the best performing sector in the month of July. Events of the past 12 months have had varied impacts on Singapore’s sectors. Over the past 12 months, the IT Sector ranked the best performing sector a total of five times.

The indicative sum of the best performing sector for each of the past 12 months was 81.8%. As illustrated below, the 81.8% total return, weighed to market capitalisation, started with the IT Sector returning 7.8% in August 2016 and ended with the IT Sector adding 5.3% in July 2017. At the same time, the combined decline for the least performing Sector of each of the last 12 months was 36.9%. By comparison, over the 12 months the STI generated a total return of 20.4%. Note this does not include any transactions fees which would be associated with the sector rotation.

Monthly Market-Capitalisation Weighted Total Returns 

Source: SGX StockFacts & Bloomberg.
For monthly data, the Indicative GICS ® Sector performance is weighed to market cap at each month end, in SGD and includes reinvested dividends.

Singapore IT Stocks Form Foundation As Disruptive Technologies Proliferate

One in 10 stocks listed in Singapore represent the IT Sector, with the majority of companies associated with technology hardware manufacturing. While semiconductors and technology hardware manufacturing are traditional strongholds of Singapore, they form a foundation as disruptive technologies proliferate. Disruptive technologies challenge established ways of doing business with efficient digital alternatives. Examples of Disruptive Technologies are Artificial Intelligence, Augmented/Virtual Reality, Big Data, Internet-of-Things and Robotics.

Like the indicative sector returns, the 10 largest capitalised stocks of the IT Sector have averaged a 47.9% total return in the first seven months of 2017, with performances ranging from a 101.0% gain for Hi-P International to a 2.6% gain for GP Industries.

Venture’s Recent Director & Substantial Shareholder Transactions

As noted above, Venture is the largest capitalised stock of Singapore’s IT Sector. Venture reported diluted (“earnings per share”) EPS of 17.2 cents for 1QFY17, up from 12.9 cents in 1QFY16, and is scheduled to report 2QFY17 results on 4 August.

Two acquisitions of Venture shares by Chairman and CEO Wong Ngit Liong in July took his stake in Venture to 6.96% from 6.86%. On 14 July, Mr Wong purchased 166,300 shares at an average price of $12.509 per share, then 105,300 shares at an average price of $12.522 per share on 17 July.

Mr Wong has been instrumental in the growth of Venture since its beginnings as a start-up in the EMS Business in the early 1980s. In Venture’s FY16 Annual Report Mr Wong maintained that as of today, many global technology industry leaders have selected Venture as their strategic partner and as a preferred provider of technology services, products and solutions.

Schroders PLC also purchased 50,000 shares of Venture on 18 July at $13.00 per share, taking its total stake in Venture back above the substantial shareholder threshold to 5.008%. Other substantial shareholders of Venture include Blackrock Inc., Aberdeen Asset Management and Sprucegrove Investment Management.

To see more details on each of the 10 biggest IT stocks by market capitalisation, including substantial shareholders in SGX StockFacts click on the links below.

Source: SGX, Bloomberg & SGX StockFacts (data as of 31 July 2017)

Recent Market Updates on the IT Sector

• 11 May: Information Technology Stocks Continue to Shine
• 18 May: Emerging Technologies to Boost Opportunities for SGX’s EMS Providers
• 25 May: Singapore Semiconductor Stocks Riding the Cyclical Upturn
• 31 May: Highlights of SGX’s Information Technology Sector Leaders

Calculations - Indicative Sector Total Returns

The market capitalisation weighted total return of the IT Sector increased to 47.7% over the first seven months of 2017. This was because Venture, which accounted for 30% of the combined capitalisation of the IT Sector as of July, saw its year-to-date total return increase from 27% to 39% over the month. Venture also made up a lesser 28% of the combined capitalisation of the IT Sector as of the end of June.

Another reason for the comparatively high indicative IT Sector total return of 47.7%,  was the average was based on stock market capitalisations as of the end of July. This means IT stocks that performed comparatively well maintained higher market capitalisation than stocks that did not perform as well, all other things remaining equal.

For instance, at the end of July, Hi-P International which rallied 11% in July, saw its market capitalisation increase by 11% for the month. Meanwhile TPV Technology, which saw a decline in total return of 14% in the month of July, saw its market capitalisation decline by 14% in July. The end result was that Hi-P International’s 101% year-to-date total return, now accounted for 7% of the combined IT Sector market capitalisation weighted returns, up from 6% at the end of June. Meanwhile TPV Technology’s 22% year-to-date total return now accounted for 6% of the combined IT Sector market capitalisation weighted returns, down from 7% at the end of June.

Calculations - Total Returns

Total returns consist of price moves and dividends, which in these Market Updates are assumed to be reinvested in the stock. For instance, Venture’s share price moved from $9.88 at the end of 2016, to $13.17 at the end of July 2017, which represented a price gain of 33.3%.

In May, Venture paid its annual dividend distribution, which totalled 50 cents, and went ex-div on 15 May, when the share price closed at $12.57. Hence the 50 cents in dividends, reinvested on 15 May, has returned 4.8%, or an extra 2.4 cents on the distribution of 50 cents per share. All up, the seven month  total return of Venture is broken down to $3.29 in price gain, $0.50 in dividends and $0.024 in reinvested dividends, which totals $3.814 per share, or 38.6%.

Recent Listings with IT Exposure 

In addition to the stocks that represent the IT Sector, there are a number of stocks that have IT exposure - two examples include two of July’s debutants -  NetLink NBN Trust and Y Ventures Group.

NetLink NBN Trust

NetLink NBN Trust designs, builds, owns and operates the passive fibre network infrastructure of Singapore’s Next Gen NBN, made its trading debut on the Mainboard on 19 July. The trust contributed IPO market capitalisation of $3.2 billion and funds raised were over $2.3 billion.

NetLink NBN Trust is a Business Trust which was five times subscribed by retail investors. Business Trusts are a suitable listing structure for big ticket assets characterised by initially high capital expenditure, followed by potential stable cashflows. Unlike listed companies, which can only pay dividends out of accounting profits, Business Trusts are permitted to pay distributions to investors from operating cashflow. For a more comprehensive overview of the stock – Click here.

Y Ventures Group

Y Ventures Group, which debuted on Catalist on 11 July, is a data analytics driven, e-commerce retailer and distributor specialising in online retail data analytics, marketing, distribution and sale of a wide range of merchandises, under third party brands and the Group’s private label, mainly under the product categories of: 

• books publishing;
• home and decor; and
• fast moving consumer goods.

To support the e-commerce retail and distribution business, the Group works closely with third party logistics companies and last-mile fulfilment service providers for its warehousing and order fulfilment requirements and from time to time provides logistics and freight forwarding services to third party customers. Further, the Group also provides waste management services in Singapore.

For a more comprehensive overview of the stock – Click here.

Catalist provides investors access to smaller-sized, yet potentially fast-growing companies. There is no quantitative entry criteria required by SGX for Catalist stocks, and businesses seeking a primary listing on Catalist must be brought to list by approved Sponsors. For more information on the Catalist board, click here.