SGX Market Updates

Singapore’s Most Defensive Stocks in 1H20


PUBLISHED ON |

02 July 2020

  • Global Indices such as the S&P 500 Index and FTSE World Index with strong Technology and Healthcare Sector representation were amongst the strongest performing Indices in 1H20 outperforming Indices more skewed to Bank and Real Estate Sector representation.

  • Of Singapore’s most 100 traded stocks in 1H20, the 20 most defensive stocks included 4 current STI constituents, with Technology and Healthcare stocks also amongst the strongest performers in the local stock market.

  • The 4 STI stocks that ranked amongst these 20 most defensive stocks included Mapletree Industrial Trust, Mapletree Logistic Trust, Ascendas REIT & Venture Corporation. Together the four stocks averaged 10% total returns in 1H20, adding to their average 34% returns in 2019. 




The first half of 2020 (“1H20”) saw sharp economic contractions across the world with lockdowns containing the spread of COVID-19 to 10 million people with a 4.9% mortality rate.



1H20’s Significant Synchronised Policy Responses

The social and economic costs of containment saw extraordinary policy responses across the globe. This included the ramping up of healthcare services and supplies, social quarantines and economic confinements, with strong fiscal and monetary stimulus.

The coincidence of these big economic measures meant they were highly synchronised, with S$11 trillion in global fiscal stimulus (13% of global GDP) and fast moving Federal Reserve-led, extraordinary monetary policy initiatives.

The urgency with which the Federal Reserve brought short-term US Dollar volatility back from near 2008 highs, generated stability in bellwether US Treasuries Yields, and by extension, demand for global stocks. The monetary transmission mechanism appeared to offer some offset to the global stock market in the face of the hard economic challenges of the measured slowdown.



Technology & Healthcare Propelled Global Indices in 1H20

From the end of 2019 through to the 23 March intraday low, the FTSE World Index in USD terms declined 33.3%, before rebounding 39.0% from 23 March to 30 June, to generate an overall decline of 7.0% for the 1H20.  Two of the best performing sectors in 1H20, Technology and Healthcare, make up as much 33% of the weightage of the FTSE World Index, in addition to making up 42% of the S&P 500 Index.

By comparison, Technology and Healthcare makes up a much less 6% of the weightage of the FTSE ASEAN All-Share Index, which declined 19.9% in USD terms in 1H20.

Similar to Singapore, Banks and Real Estate are by far the biggest Sectors of the FTSE ASEAN All-Share Index. Globally, the top quartile of listed banks by market value generated a median decline of 21% in total return (in SGD terms), with the top quartile of global Real Estate stocks generating a median decline of 16%. This saw the 1H20 declines of the both the Straits Times Index (“STI”) and the FTSE ASEAN All-Share Index anchored between the global performance of the two sectors.



1H20 Showed Again that Singapore Maintains a Highly Diversified Stock Market.

While the foundations of the heavyweight Bank and Real Estate sectors are clearly evident, Singapore’s stock market is also highly diversified. Of Singapore’s 100 most traded stocks by turnover in 1H20, the 20 most defensive performances, included 4 current STI constituents and are tabled below.

Similar to the aforementioned global benchmarks, Technology and Healthcare stocks were amongst the strongest performers in the stock market. 

As detailed in the table, the strongest segments of the Healthcare Sector were the manufacturers and distributors of medical equipment and supplies, also observed across the global Healthcare Sector. Likewise in Technology, the pick-up in global digitalisation supported stocks with exposure to internet enterprises and cloud providers, including Keppel DC REIT, Mapletree Industrial Trust and NetLink NBN Trust in Singapore.


100 Most Traded Stocks in 1H20
- 20 Best Performing in 1H20
SGX
Code
Market Cap
S$
1H20
Average
Daily
Turnover
S$
1H2020
Net
Institutional
Flow
S$
Total
Return
1H2020
%
Total
Return
2019
%
1 Year
Volatility
%
Medtecs International 546 208,776,272 8,080,221 -7,857,492 927 37 159
UG Healthcare 41A 231,389,568 3,923,774 12,167,423 743 -34 150
Top Glove BVA 14,197,641,216 1,496,202 -18,636,740 240 -14 65
Riverstone AP4 1,934,229,376 3,699,776 -16,727,969 185 -17 51
Singapore-eDev 40V 143,349,904 1,312,021 -2,236,158 172 34 138
IPS Securex 42N 42,666,280 1,023,366 -837,248 120 -27 137
AEM AWX 861,279,104 20,128,256 39,027,692 57 154 56
Synagie V2Y 54,755,368 1,410,594 2,172,413 39 -18 59
Sheng Siong OV8 2,480,836,096 5,880,822 11,191,668 35 21 27
Biolidics 8YY 79,409,192 3,303,804 -2,122,026 24 11 109
Clearbridge Health 1H3 102,045,888 2,818,144 -2,353,868 23 -17 74
Keppel DC REIT AJBU 4,147,616,000 18,981,569 57,197,771 23 66 34
Japfa UD2 1,403,623,040 1,897,773 4,772,956 22 -18 51
Mapletree Industrial Trust ME8U 6,318,304,768 25,118,567 33,515,126 14 44 39
Mapletree Logistics Trust M44U 7,380,719,104 42,606,959 89,127,064 14 46 38
Trendlines 42T 84,657,480 1,357,186 -5,428,701 11 2 81
Ascendas REIT A17U 11,476,152,320 53,777,405 274,856,229 8 24 33
NetLink NBN Trust CJLU 3,780,061,952 12,354,979 6,978,975 5 31 26
Keppel Infra Trust A7RU 2,694,836,480 5,079,379 -1,976,270 4 21 31
Venture Corp V03 4,680,301,056 24,545,606 134,136,833 3 21 33

Source SGX, Bloomberg, Refinitiv (Data as of 30 June 2020)



Small cap stocks also featured in the 20 stocks with as many as four stocks ranking in the top 100 stocks by turnover, yet currently maintaining market capitalisation of less than S$100 million.



Half of the STI’s REITs Amongst Singapore’s 20 Best Performing Actively Traded stocks in 1H20

3 of the 6 REITS that make up the STI were amongst the 20 most defensive performers tabled above - Mapletree Industrial Trust, Mapletree Logistic Trust and Ascendas REIT.

Increased market volatility impacted REITS in 2020, seeing increased trading activity by active investors looking more to REITs for momentum than stable returns.  Retail Investors returned as net buyers of the wider group of Singapore REITs and added to REIT ETF positions, after the major market lows on 23 March, possibly on valuations rather than yields. The upshot of this was that REITs continue to represent 26% of the total stock market turnover in the first half of 2020, while maintaining 12% of the S$817 billion in total stock market capitalisation. 



Supply Side Disruptions and Inevitable Realignments

Businesses deemed as suppliers of essential products or essential services have continued to operate through 1H20. Venture Corporation is amongst Singapore’s largest manufacturing companies and as tabled above was the STI’s best performing company in 1H20 with a defensive 3% total return. The company noted that by the end April, most if not all of its operating entities received exemptions to operate without headcount or working hours constraints. As such, the supply side of its businesses had resumed operations while continuing to comply with all safety and precautionary measures for employees who work on sites.

In its 1Q20 Business Update management noted (click here for more) Venture Corporation noted some realignment of the global supply chain seems inevitable, and this presents opportunities for the Venture Group, with potential beneficiaries of these opportunities are its entities in Singapore and Malaysia.



Growth Expectations into 2021 

From a pure data perspective, context for the sharp contractions in 1H20 GDP, employment, and the key sectors of retail, services and industrials, will come in 2H20 and into 1H21 on the proviso social and economic containments continue to be lifted.

The optimistic adage of its not how hard you fall, but how high you bounce will be one perspective applied to the next six months of global economic releases. While the IMF estimate global GDP to decline 4.9% in 2020, it is expected to rebound 5.4% in 2021. As illustrated below, advanced economies are leading both the swings in GDP declines in 2020 and estimated GDP growth in 2021. 



IMF GDP Growth Estimates (%)



For the full IMF Report click here.


At -4% to -7%, Singapore’s GDP growth forecast for 2020 is in-line with the global and advanced economy estimates. Unity, Resilience, Solidarity and Fortitude Budgets are now providing fiscal stimulus measures equivalent to around 20% of Singapore’s GDP, which is among the largest proportions across the world with the global average at 13%.



The Key Economic Risk in 2H20

Looking forward, the key economic risk not just for the United States, but indeed the World, was conveyed by Federal Chair Powell on 17 May in a 60 minutes interview - if GDP is to move back up, after the very low numbers in the June quarter, and unemployment is to come down, the big thing the country has to do is avoid a second wave of the virus over the next couple months. Hence, a current market focus is the spike of COVID-19 cases in the United States, in addition to the Federal Reserve not dismissing Yield Curve Targets to further its supportive measures.







This article is provided by SGX My Gateway.



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