Singapore Budget 2018: Stock analysts expect knee-jerk dip for developers, support for consumer sector

THE higher buyer's stamp duty announced in Budget 2018 could trigger a knee-jerk reaction in developer stocks, according to analysts.

But they continued to keep a bullish stance on property plays, noting that the impact on demand would be marginal.

On Monday, Finance Minister Heng Swee Keat announced that the government will raise the top marginal buyer's stamp duty rates for residential properties from 3 to 4 per cent.

The new top marginal rate, which kicks in on Tuesday, applies to a portion of residential property value that is more than S$1 million.

RHB believes the move, though unexpected, should not significantly dampen the housing market.

"Any weakness in share price for property developers would offer a good buying opportunity," it said, recommending CapitaLand and Apac Realty, which is expected to benefit from more Housing Board resale transactions in light of higher Proximity Housing Grants.

CIMB noted that the stamp duty hike means upcoming en-bloc deals would have higher all-in land cost.

"This may dampen the appetite for new en-bloc transactions and slow the pace of new completions in the medium term when these sites are redeveloped," the brokerage said.

But it remains positive on residential developers, keeping its "add" ratings on UOL and City Developments.

Plans for raising the Goods and Services Tax (GST) to 9 per cent from 7 per cent sometime between 2021 and 2025 could benefit consumer firms like Courts, Sheng Siong, Jumbo and FJ Benjamin, UOB Kay Hian said.

DBS Group Research reckoned that "Genting Singapore, which was sold down last week on GST concerns, should see a good rebound" on news that the GST hike will be deferred for a few years.

DBS, which counts United Overseas Bank, OCBC Bank, Keppel Corp, Sembcorp Marine, Singapore Post and BreadTalk Group among its top picks, also took note of the new S$5 billion rail infrastructure fund. Singapore Technologies Engineering is a likely contender for the Singapore-Kuala Lumpur high speed rail project and could benefit from rail infrastructure projects, DBS said.

The extension of the wage credit scheme, through which the Singapore government helps to co-fund pay increases, until 2020 will also be positive for consumer companies.

CIMB identified Sheng Siong Group, BreadTalk and Neo Group as possible beneficiaries from that initiatve.

DBS expects a positive impact of one to 4 per cent on forecasts for consumer firms including HRnet Group, Sheng Shiong Group and Jumbo Group, companies with a large workforce within lower income groups that stand to benefit more from the wage credit scheme.

As for the offshore and marine sector, UOB Kay Hian noted the government's move to defer levy rate increases for foreign workers was "a right move", although it is likely to have marginal impact on firms.

"It remains insufficient to turn the tide for the beleaguered offshore and marine companies, which still suffer from poor or negative operating cash flows and crushing debt loads that threaten to throw smaller players into insolvency," it said.

The impending introduction of a carbon tax will be marginally negative for both Keppel and Sembcorp Industries, although this will only come through in 2020, UOB Kay Hian added.

Taken together, brokers largely agree on a positive "post-budget" market reaction.

"STI has been resilient and is base building for the next uptrend. We continue to like banks, while expecting rotational interest in oil/gas, small mid-cap and the consumer sector to be sustained," DBS said.

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