Broker's take: Credit Suisse expects Singapore market to be 'more resilient' in severe Wuhan virus outbreak

IN the event of a significant Wuhan pneumonia outbreak, the Singapore market is expected to be more resilient than it was during the 2003 severe acute respiratory syndrome (Sars) outbreak, according to Credit Suisse.

It expects more resilience as market ROE (return on equity) has improved structurally to 9.8 per cent from 6.6 per cent in 2003. Control measures have also advanced since Sars, the brokerage said in an equity research report, dated Monday, examining how the market reacted to Sars in 2003.

Stocks which underperformed during the Sars outbreak include gateway services provider SATS and Mandarin Oriental, which were both down 13 per cent, and Singapore Airlines, which was down 8 per cent at the time.

Credit Suisse said it remains cautious on SATS, which has a "underperform" recommendation, as it sees downside risks to earnings with a decline in Singapore cargo volumes. As at 2.25pm, SATS shares were trading at S$4.96, down 10 Singapore cents or 2 per cent.

During the Sars outbreak, tourism-related stocks underperformed. Visitor arrivals in Singapore fell 62 per cent year on year in the second quarter of 2003, and dropped to a low of around 178,000 arrivals in May. Arrivals also remained weak for most of the year until November which saw an 8 per cent growth year on year.

Average room rates also fell 14 per cent to S$105 in May 2003, from S$122 earlier in March. Retail sales also fell 8 per cent year on year in April and May 2003. However, retail mall occupancy remained resilient at above 90 per cent.