In 1H19, Singapore’s 30 most actively traded manufacturers (non-food) produced 20% average total returns, outpacing STI gains, in a similar style to their below benchmark performance amidst declines in 2018, and above benchmark total returns amidst gains in 2017 and 2016.
1H19 total returns of the 30 stocks were more consistent than recent years, with a median 21% total return, 24 gainers & six decliners, combined net institutional inflows of S$264 million; with Memtech, Jadason & Hi-P Int, the strongest performing of the 30.
Together the 30 stocks accounted for more than one-tenth of the day-to-day turnover of the Singapore stock market in 1H19. Manufacturers YZJ, Venture, Sing Tech Eng, AEM & Sembcorp Marine were also amidst Singapore’s 30 most active stocks by turnover for 1H19.
The global economy in the first half of 2019 was mostly characterised by downgrades to the outlook for global economic growth, weakening Purchasing Manufacturing Indices across the globe and trade tensions between the World’s two largest economies returning in early May through to end of June.
However, an outlook of lower interest rates, strength in commodity prices, combined with the fact that the 2019 decelerating growth had begun to be built into market expectations in 2018, saw the majority of Singapore’s 30 most actively traded non-food manufacturing stocks generate positive gains in 1H19. The average market value of these 30 stocks, measured by their market capitalisation is S$1.2 billion. Hence in many cases these businesses are either multinational corporations or amongst the leaders in their product field.
These 30 stocks include five companies that are amongst Singapore’s 50 biggest companies by market capitalisation - Singapore Tech Engineering, Yangzijiang Shipbuilding, Venture Corporation, Sembcorp Marine and Haw Par Corp.
Cyclical Nature of Manufacturing
Performance of the manufacturing stocks over the past three and half years is illustrated in the chart below. The mean and median total returns of the 30 manufacturing stocks is provided in addition to the STI total returns. Note while each stock has its own intrinsic drivers – from product cycles to market share, the combined performances of the 30 manufacturing stocks that span multiple sectors and countries can provide for a general inference to past trends and sensitivity to global growth.
When the STI generated positive gains, the manufacturing stocks outpaced those benchmark gains and when the STI generated declines, the manufacturing stocks tended to exacerbate the benchmark’s decline.
Recent years has seen some significant swings to the global growth outlook which has decelerated since Singapore was amongst the strongest growing advanced economies across the world in 2017.
During the period covered in the above chart, the Singapore SIPMM recorded 32 months of consecutive expansion, before registering a 49.9 contraction for Singapore in May. The PMI for June is expected to be released before the market open tomorrow. SIPMM noted in recent releases that anecdotal evidence suggested that manufacturers are increasingly concerned about the escalation of trade tensions between the world’s two largest economies. Any reprieve following the G20 developments over the weekend would expected to be shown in the July PMI to be released in early August.
Total returns of the 30 stocks in 1H19 were more consistent than recent years, with a median 21.1% total return and average total return of 20.4%. This was a contrast to the skew in 2017 average total returns due to performances from AEM Holdings, Jadason Enterprises and Hi-P International.
In terms of net institutional inflow, Yangzijiang Shipbuilding and Singapore Tech Engineering ranked as the second and fifth highest recipients amongst all SGX stocks in the 1H19. Combined the 30 stocks saw net institutional inflows of S$264 million over 1H19. The segment also contributed over one-tenth of the day-to-day turnover value of all stocks listed on the SGX.
The 30 non-food manufacturing stocks, sort by highest turnover in are tabled below.
|SINGAPORE TECH ENGINEERING||S63||19||14||22||11.8||19|
|HAW PAR CORP||H02||92||46||26||7.9||18|
|FU YU CORP||F13||117||231||13||10.1||28|
|CHUAN HUP HOLDINGS||C33||173||192||30||-3.7||42|
|AA GROUP HOLDINGS||5GZ||196||485||-47||-51.3||127|
|HALCYON AGRI CORP||5VJ||207||118||22||-29.8||41|
|ELEC & ELTEK INT CO||E16||229||170||8||-11.7||34|
|NAM LEE PRESSED METAL IND||G0I||232||282||5||1.1||25|