Broker's take: DBS says 'relook 2020 winners', reduce exposure to supermarkets, glove makers

DBS Group Research on Tuesday said it is time for investors to reassess their positions, recommending that they reduce exposure to "2020 winners" such as supermarkets and glove makers and focus instead on tech, logistics and yield plays.

This comes as the first outcome for final vaccine trials could be as soon as October, with more by Q1 2021, DBS noted.

According to the DBS analysts, supermarket stocks such as Sheng Siong and Dairy Farm International have likely recorded their best quarter in the second quarter this year due to stay-at-home orders.

"In Singapore for example, sequential supermarket sales growth began to normalise from May even during the country's 'circuit-breaker' period as 'panic buying' of groceries faded and diners turned towards online food delivery," DBS said.

Meanwhile, glove maker stocks could see "wide price fluctuations" as the market is anticipating strong earnings for FY20 and FY21 and positive Covid-19 vaccine news could spell uncertainty for the sector, DBS noted.

"While near-term share prices may still be supported by earnings, we recommend that investors sell into rallies as a vaccine deployment for the masses could start as soon as Q4 2020," the analysts said, adding that there is "little dividend support" for the share prices once earnings come off.

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Instead, investors should maintain their exposure on tech stocks such as Venture Corp, which is a beneficiary of a "power shift in structural demand" on IT infrastructure, 5G and data centres, DBS noted.

With interest rates remaining low, the DBS analysts continue to like real estate investment trusts (Reits) with room for yield compression. They added that the low interest rate environment reduces the cost of debt and funding, which could potentially lead to accretive acquisitions.

DBS's top picks for office Reits are Keppel Reit and Mapletree Commercial Trust, while its top picks for retail Reits are CapitaLand Mall Trust and Lendlease Global Commercial Reit.

Within the logistics sector, DBS favours Ascendas Reit and Frasers Logistics & Commercial Trust, based on the rising e-commerce trend, it said.