Market/Sector/Industry Outlook in 2018 – On-going Updates

[Jupiter2017]

http://www.businesstimes.com.sg/com...t-top-five-shopping-list-on-market-correction
Brokers' take: CIMB puts out top-five 'shopping list' on market correction
Wed, Feb 07, 2018 - 3:24 PM Annabeth Leow leowhma@sph.com.sg

AS the market enters a long awaited correction, stock watchers are revising their strategic picks for what to buy when a dip in share price comes.
"No one knows how long the correction will last but we see the opportunity to prepare a shopping list of 'must-own' stocks backed by fundamentals," CIMB analyst Lim Siew Khee said in a flash note on Wednesday morning.
The stocks are now all trading above the threshold that Ms Lim is eyeing, but could be scooped up if they slide into the sweet spot.
She suggested buying into electronics provider Venture Corporation at S$21.77, on the back of its resilience.
Ms Lim noted that the second half of the year is seasonally stronger for the company and "we believe its business momentum is still strong with no disruption seen across its end-customer".
Venture was trading lower by S$0.31, or 1.38 per cent, at S$22.17, as at 3pm.
She also suggested buying casino operator Genting Singapore at S$1.20, as credit loosening in its VIP business "could help to lift overall gross gaming revenue".
Genting was down by S$0.01, or 0.79 per cent, to S$1.26, as at 3pm.
Other counters on the list will have some way to fall, as they have shrugged off the market tumult early in the week.
Keppel Corporation, which has been a darling among brokers despite a bribery scandal's toll on its latest earnings, was also among Ms Lim's picks.
Catalysts for the conglomerate include offshore and marine orders, rig sales and land deals in the Tianjin Eco-City project.
While CIMB most recently upped the target price to S$10.00, Ms Lim recommended buying at S$7.85.
Keppel was up by S$0.03, or 0.37 per cent, to S$8.22 as at 3pm.
ST Engineering was pegged as a buy at the S$3.15 mark.
The counter's lustre came in part from the guess that the recent performance of slightly-dearer peer SIA Engineering points to a revival in engine maintenance repair and overhaul prospects.
ST Engineering made gains of S$0.04, or 1.24 per cent, to S$3.27, as at 3pm.
When it came to AEM Holdings, Ms Lim tipped a buy at S$4.70, with a target price of S$6.62, with a forecast of 35 per cent year-on-year earnings growth in 2018.
AEM was up by S$0.02, or 0.37 per cent, to S$5.38, as at 3pm.

 

[Jupiter2017]

http://www.businesstimes.com.sg/rea...-see-strong-growth-over-next-few-years-report
Singapore office, retail rents to see strong growth over next few years: report
Wed, Feb 07, 2018 - 4:49 PM Rachel Mui rachmui@sph.com.sg

SINGAPORE'S office rental growth is likely to see the strongest overall growth over the next three years, according to M&G Real Estate's latest market outlook on real estate in the Asia-Pacific region.
M&G expects rental growth in Singapore offices to rise at 6 per cent per annum over the next three years, driven by a medium-term grade A supply drought.
Similarly on the retail front, retail rents in Singapore should start to rise by around 1.5 per cent per annum, as both tourism spending and domestic consumer sentiment improve in 2018, M&G said.
"In addition, the positive effects of residential en bloc sales may boost further consumer spending, as sellers cash out and redeploy this money elsewhere," the global property investor said.
It noted however that a potential goods and services tax hike in 2018 or 2019, estimated at 9 per cent by analysts, could restrain spending initially as consumers adjust to this new level.
Lastly, organic growth from e-commerce, coupled with retailers expanding their omnichannel efforts, should drive healthy demand for logistics warehousing, and support stable rental growth in the region, M&G noted.
That being said, there may be some markets that need time to work through existing or new logistics supply where completion levels are high, such as in Singapore and Osaka.

 

[Mergui219067]

No doomsday for retail malls?

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[Jupiter2017]

http://www.businesstimes.com.sg/ene...st-weekly-loss-in-2-years-amid-market-turmoil
Oil skids to biggest weekly loss in 2 years amid market turmoil
Sat, Feb 10, 2018 - 6:55 AM

[NEW YORK] Oil prices slid more than 3 per cent on Friday as US futures fell below US$60 a barrel for the first time since December on renewed concerns about rising crude supplies.
US and Brent crude futures have slid more than 11 per cent from this year's peak in late January. Brent fell nearly 9 per cent for the week while US crude dropped 10 per cent, the steepest weekly declines since January 2016.
Futures posted a sixth straight day of losses, wiping away the year's gains in a string of high-volume trading sessions, pressured by stronger-than-expected supply figures and a surprising ramp-up of the North Sea Forties Pipeline, which shut earlier in the week.
Turmoil on Wall Street also pressured crude. During the trading session, the S&P 500 stock index fell to its lowest level since Oct 5. The S&P recovered to end the day higher, which helped oil bounce off session lows.
US West Texas Intermediate (WTI) crude settled down US$1.95, or 3.2 per cent, to US$59.20, the lowest settlement since Dec 22. The session low for US crude was US$58.07. More than 845,000 contracts changed hands in another above-average day for trading volumes.
Brent futures fell US$2.02 a barrel, or 3.1 per cent, to US$62.79 a barrel, its lowest settlement since Dec 13.
"It's never just one factor that slams the market like this. It's several factors," said Jim Ritterbusch, president of Ritterbusch & Associates.
Oil services company Baker Hughes said total US onshore rigs rose by 26 to 791, the highest since April 2015 and the biggest one-week rise in a year. Drillers have added rigs as oil prices rallied through mid-January.
The market has been pressured by the weak stock market. Also, oil is inversely correlated with the US dollar, which has strengthened as equities markets slid.
Crude volumes in the North Sea Forties pipeline continued to ramp up faster than expected following a restart, a trade source told Reuters.
The news that the line will reach full rates over the weekend intensified oversupply worries, said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
"The idea that it is back up and running normally, combined with the data that show US production is rising, contributes to the overall idea that US production could offset cuts by Opec," said Mr McGillian.
Investors were already worried that rising US crude production will overwhelm efforts by Opec and other producing nations to cut supply. US output rose to 10.25 million bpd in the most recent weekly figures, which if confirmed would represent a record. The Baker Hughes figures should mean still more supply in coming months.
On Thursday, Opec member Iran announced plans to boost production within the next four years by at least 700,000 barrels a day.
"We think that surging supply and slowing demand growth will tip the market back into a surplus this year," analysts at Capital Economics said in a note.
REUTERS

 

[Jupiter2017]

http://www.straitstimes.com/business/keep-calm-and-stay-invested
A version of this article appeared in the print edition of The Sunday Times on February 11, 2018, with the headline 'Keep calm and stay invested'. - Eli Lee
• The writer is head of investment strategy, Bank of Singapore.

Keep calm and stay invested

The global equity sell-off continued last week, wiping out year-to-date gains and more.
The US market is down 10 per cent from its last peak last month and, on Monday, suffered its worst single-day correction since 2011, with the Dow Jones ending the session down 4.6 per cent while the S&P 500 fell 4.1 per cent.
In response, the widely followed CBOE SPX Volatility Index, also known as the VIX, soared as high as 50, hitting its highest level in three years.

EQUITIES OUTLOOK STILL POSITIVE
We urge investors to remain calm and stay invested.
Despite the turbulence, the longer-term outlook for global equities remains positive. This is firmly underpinned by broad-based growth momentum across key economies, with further support to come from US tax cuts. In fact, for 2018-19, we expect to see the strongest global economic expansion since the financial crisis, and the risk of a recession remains low.
The correction in recent days is not likely to have a meaningful impact on underlying economic fundamentals, which have been resilient over the growth up-cycle thus far, and our forecasts for healthy corporate earnings remain intact.

CONSOLIDATION HERE IS HEALTHY
Before this drawdown began, global equities had enjoyed the strongest start to any year in almost two decades. They were also on their longest run without a correction of at least 5 per cent since the 1970s. Trees cannot grow to the sky; a consolidation here should not be surprising.
History also shows that corrections in excess of 10 per cent are not unusual - even in bull markets - and these are usually short-lived and markets take an average of less than six months to recover.
Some headlines have raised alarm that the Dow has never declined over 1,000 points in a single session before it did on Feb 5, but this is true only because of the high base of the index today. In percentage terms, a single-day decline in excess of 4 per cent is not rare for the Dow, and has occurred 27 times since 2000.

EQUITY WEAKNESS CLOSELY LINKED WITH RISE IN BOND YIELDS
The current weakness in equities is closely associated with the US 10-year Treasury yield rising rapidly from 2.4 per cent to 2.8 per cent over the last month, which caused trepidation as a disorderly surge in yields can potentially have a disruptive impact on both markets and fundamentals.
The move in yields was mostly due to heightened expectations of US inflation, which has been underpriced by the market. We believe that inflation will continue its upward push over the next few months, which will pressure the Fed towards a faster pace of rate hikes than what consensus currently anticipates.
Over the longer term, however, the normalisation of inflation and interest rates is a positive thing. This forms part of an overall picture of healthy demand and growing economic activity, driven by broadly improving fundamentals across consumption, investment and trade.
As long as growth momentum stays positive, steady hikes in rates towards more neutral levels are unlikely to derail the positive long-term outlook for equities.

TECHNICAL FACTORS WORSENED THE PAIN
Stretched technical factors in the equities market before this drawdown - such as heavy positioning, high margin levels and market sentiment - exacerbated the speed and magnitude of this correction.
As equities fell, we saw limited risk-off contagion across asset classes, and the credit, foreign exchange and commodities markets were relatively well-behaved. This suggests to us that a significant part of the equities correction can be attributed to the reversal of technical factors, which may take some time to balance out.
The record surge in volatility also resulted in unusual implications. The popular VelocityShares Daily Inverse VIX Short-Term ETN (XIV US) - designed to give a return inversely proportionate to the VIX Index - was wound up after suffering crippling losses as the VIX soared.
High realised volatility also triggered selling from various systematic investment strategies, and we could see more selling pressure from this group over the near term.

STAY INVESTED AND BE PREPARED FOR VOLATILITY
With the divide between near-term technical weaknesses and the positive long-term outlook, fundamental investors are likely to re-emerge as buyers over time as near-term selling becomes exhausted.
Investors should stay invested, and be prepared for a more volatile market than what we saw last year.