GE results could tilt some policies further left: Citi

Review of foreign manpower policies could impact property sector; Covid-19 measures to drive stock market

Published Mon, Jul 13, 2020 · 09:50 PM


ANALYSTS believe that post-GE2020, some government policies would tilt further to the left, with implications for both the markets and the economy.

In a report on Monday, Citi said the shift may be reflected in part by a further review of foreign worker policies. The focus will not just be on the size of the foreign-worker pool, but also on the composition of the foreign workforce.

"Against the backdrop of job market slack, tightening of foreign worker manpower policies would have happened in any case, with 60,000 foreign jobs already lost in the first five months of 2020. With population and labour force growth unlikely to accelerate, this could cap potential growth and property demand," it said.

Citi further noted that lower population growth would also result in a "softer demand and supply balance for property", especially with the completion of earlier redeveloped en bloc sales resulting in a spike in supply, especially from 2021 onwards.

"Making the property tax structure more progressive could also be considered as another form of wealth tax, especially with the objective of diverting resources from less productive property investments," according to Citi.


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Still, Krishna Guha, an equity analyst at Jefferies, remained positive on Singapore developers, saying they are likely to be supported by "low rates, ample liquidity and undemanding valuation".

Beyond property companies, analysts say the broader stock market will continue to benefit from policies - both recent and new - aimed at helping businesses amid the Covid-19 pandemic. This is despite some shift in policy over the longer term following the latest election results.

On Friday, Singaporeans went to the polls and gave the ruling People's Action Party (PAP) an overall share of 61.24 per cent of the votes, compared with 69.9 per cent in 2015. The opposition Workers' Party also won a second group representation constituency in Sengkang, wresting control from the PAP.

OCBC Investment Research said on Monday that any impact on Singapore's stock market from the latest election showing should be negligible and short-lived.

"Despite a decline in PAP's vote shares and Parliament seats, we expect any impact on the stock market to be temporary and insignificant, given our expectations of policy continuity in the near term," the research team said in a report.

"As the (Covid-19) situation is still evolving, any additional policy support from the government post-election could be a bonus and a boost to the market."

The Straits Times Index (STI) is trading at about 13.6 times price-to-earnings, near its 10-year mean of 13.3 times. The negative impact from the coronavirus pandemic has been largely priced in too, said OCBC. The STI closed on Monday at 2,631.08 points, down 21.57 points or 0.81 per cent.

Maybank senior economist Chua Hak Bin said the election results may be seen by some investors in a positive light, with hopes of seeing more robust debates on policies.

"I don't think it will change the fact that Singapore is pretty much open for business and for foreign investment," he told The Business Times.

According to Citi, the STI rose 3.8 per cent in the one month after GE2015, and noted a possible positive correlation between the PAP's gain in vote share and equity market performance in the month post-election since 1988.

"While the PAP's showing would still be considered stellar by global standards, it was nonetheless a significant surprise in the local context, especially against initial expectations of a PAP landslide, and marked a clear departure from the 'flight to safety' tendency of voters historically witnessed during recessions or slowdowns," Citi said.

"Overall, the results mark a continued evolution towards a two-party system that started in GE2011, catalysed by a new generation of younger voters... attention now turns to timing and shape of political succession within PAP, which may have implications for economic policies."


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