Market value of Singapore stocks shrinks again in August

Singapore

THE combined value of all Singapore stocks shrank in August as an uninspiring corporate earnings season, inverted yield curves and a late-July US Federal Reserve rate cut heightened fears of a global slowdown.

Amid the flurry of earnings cuts and geopolitical anxiety, defensive stocks and Reits were the flavour of the month, with Thai Beverage seeing its market cap swell the most, and by a wide margin.

DBS analyst Andy Sim said: "ThaiBev's outperformance arises from its strong growth in its net profits for the quarter ending June, arising from better than expected margins and associates contribution. In addition, the company also noted that government spending and higher farm income contributed to the improvement for the food and beverage industry.

"There is also a general preference for companies that are relatively more insulated against the uncertainties arising from trade war. We believe that with continued improvement in domestic Thai consumption, coupled with higher contributions from its recent acquisitions, there could be room for ThaiBev to re-rate over the medium term."

Reits dominated the list of biggest gainers, led by Mapletree Commercial Trust. The market is betting that MCT will replace Hutchison Port Holdings Trust in the benchmark Straits Times Index (STI) during next month's review.

A bid by electrical components company CEIEC to privatise TPV Technology, the world's largest manufacturer of monitors, also caused TPV's market value to swell in August.

The biggest loser was Prudential, which is also listed in London and Hong Kong. Prudential's decline is in tandem with other life insurance firms, whose earnings are correlated to stock market returns.

Civil unrest in Hong Kong and challenges in the auto sales and supermarkets business also put Jardine Matheson, Jardine Strategic, Hongkong Land and Jardine Cycle & Carriage on the list of stocks that saw their market value shrink the most in August.

Sentiment also soured for banks on signs of slowing loan growth, with DBS Group Holdings leading the falls, followed by OCBC Bank and UOB after the Fed cut rates by 25 basis points at the end of July. The market is bracing for net interest margins to take another hit if more rate cuts pan out this year.

CGS-CIMB analyst Lim Siew Khee said: "DBS is most sensitive to rates so with a rate cut announcement it would be the one that moves the most."

She expects the banks to trade range-bound for the rest of the year, though any positive developments in US-China trade talks could bring investors piling back into bank stocks.

UOB is Ms Lim's top pick, followed by DBS and OCBC. Overall, the market cap of the 729 companies on the Singapore Exchange fell 6.8 per cent to S$862.5 billion in August, according to data compiled by The Business Times.

Compared to a year ago, August's market cap was down 6.9 per cent.

The broad market decline was in step with the STI, which finished at 3,106.52 on Friday, down 5.9 per cent since the end of July, but still up 1.2 per cent since the year began.

In the past 12 years, the STI has ended the month of August with a median decline of 2.85 per cent. The index tends to peak in July before bottoming in early September, DBS Research noted.