Budget 2022: Winning and losing stocks from Singapore's Budget

[SINGAPORE] Tax changes in Singapore's Budget are positive for certain retail stocks and firms that are reducing their carbon emissions, but some multinational companies, property developers and luxury vehicle stocks emerge as losers. Finance Minister Lawrence Wong unveiled a budget last Friday (Feb 18) that seeks to rebuild Singapore's finances and chart a post-pandemic future by raising taxes on the wealthy and on consumption. The benchmark Straits Times Index closed 0.4 per cent lower, though in the long term analysts said the budget should offer some support.

"Singapore's fiscally smart moves would help boost its status as a country offering stocks that give high income and dividend yields," said Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer. The benchmark index has risen about 10 per cent this year, with the rotation towards value stocks helping it vie with Saudi Arabia's Tadawul All Share Index for the top spot among major global gauges.

Here are details of what analysts see as the main winners and losers from the budget:

WINNERS

Consumer stocks

Singapore's move to space out the much anticipated increase in goods and services tax (GST) over 2 years - increasing it to 8 per cent in 2023 and to 9 per cent in 2024 - may be positive for consumption-linked companies. Many analysts had expected the government to raise GST, currently 7 per cent, directly to 9 per cent.

Potential beneficiaries are food and beverage maker Fraser and Neave, grocer Sheng Siong Group, and restaurants and food caterers such as Jumbo Group and Kimly. Casino operator Genting Singapore and consumption-focused real estate investment trusts (Reits) such as Keppel Reit may also get a lift.

Carbon neutral plays

Singapore plans to dramatically increase the tax it levies on greenhouse gas pollution from its biggest emitters from 2024.

The move "signals the government's seriousness to meet its climate goals", said Terence Chua, an analyst at Phillip Securities Research. "Companies such as Sembcorp Industries and Keppel Corp will benefit from their early push to reduce carbon emissions."

Conversely, emissions-heavy companies such as Singapore Airlines will be affected negatively, Chua added.

LOSERS

Multinational companies

Singapore's plan to explore a top up tax for multinational enterprises may weigh on some units of Jardine Matheson Holdings group as they get a majority of their revenue from Greater China. Others that may suffer include City Developments Limited (CDL) - which makes about 8 per cent of its revenue from the Americas and about 10 per cent from Europe, the Middle East and Africa (EMEA) - and ComfortDelGro which gets about 23 per cent from EMEA, according to data compiled by Bloomberg.

"The move may impact some companies even as it is preliminary," said Justin Tang, head of Asian research at United First Partners. "The government clearly has a plan, but it's best for investors to take a wait-and-see approach as more details will trickle out over the coming days."

Property developers

Real estate stocks took a hit from Singapore's move to increase the minimum monthly salary for foreign workers as well as tightened rules for the number of foreign work permit holders. Shares of CDL, one of Singapore's biggest developers, pared gains of as much as 1 per cent to end the day up 0.4 per cent. UOL Group wiped out an advance of as much as 0.7 per cent.

More negatives for developers were the increases in personal income tax rates on the wealthy, and higher levies on residential properties from 2023. That will likely weigh further on CDL, which counts The Residences at W Singapore Sentosa Cove among its properties, and on other developers.

Wealth plays

Higher taxation rates of 220 per cent on cars, which apply for the portion of open-market value in excess of S$80,000, will affect names such as Jardine Cycle & Carriage, which owns showrooms.

And the increase in income tax rates for top earners will affect some clients of the wealth management units of DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank. BLOOMBERG