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Market value of S'pore stocks shrinks as funds take cover from poor earnings visibility

For the past decade, the Singapore market has always ended August lower, on average, by 4.2%

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Cold Storage supermarkets (above) are a part of the Dairy Farm Group, whose shares have swung wildly but ultimately snapped back to their early-July highs.

Singapore

THE combined value of all Singapore stocks shrank in August as the curtain fell on an earnings season marked by more misses than beats.

But a weak market has pumped up defensive stocks as funds seek shelter while waiting out the trade-war jitters and poor earnings visibility. Oversold counters and yield plays also found some favour.

Dairy Farm, CapitaLand, Yangzijiang Shipbuilding, Wilmar, Venture Corp, Prudential, Top Glove, Singtel, Frasers Logistics & Industrial Trust and Sheng Siong saw their market caps swell the most in August, data compiled by The Business Times shows.

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Dairy Farm shares have swung wildly, but ultimately snapped back to their early-July highs. Weaker-than-expected results and a slower growth outlook had triggered a sharp sell-off after July 26. Dairy Farm lost 0.32 per cent on Friday to close at US$9.27.

Dairy Farm still needs more time to reverse its sliding profits in the supermarket and hypermarket business, DBS analyst Alfie Yeo said: "I don't think anything has changed. The shares went down because there was some disappointment in terms of the results, but the market being weak also prompted people to move into more defensive stocks. We see this with Sheng Siong as well. Both moved up nicely."

Sheng Siong shares rose 0.86 per cent to close at S$1.17 on Friday, after reaching a 52-week high of S$1.18 on Aug 23, rallying on a revival in new store growth.

On Aug 17, the heartland supermarket brand said it had won bids to open two new stores occupying a combined 30,400 sq ft of retail space in Woodlands. Sheng Siong was also the highest bidder for two more shops pending a decision from the Housing Board.

CapitaLand shares have rebounded to June levels, erasing the damage wrought by the snap return of property-cooling measures on July 5 after punters realised that its exposure to the Singapore residential market is actually relatively small. Capitaland shares fell 0.29 per cent to close at S$3.43 on Friday.

Yangzijiang Shipbuilding also took off from its 52-week lows of S$0.85 in July after announcing results on Aug 7 that were a positive surprise. The shares fell 5.31 per cent to finish at S$1.07 on Friday.

Credit Suisse analyst Gerald Wong said: "Their shipbuilding margins were stronger than expected, and they maintained their target for new orders in 2018.

"There had been trade-war concerns because shipbuilding is linked to global trade."

In fact, a weaker Chinese yuan caused by trade war spooks could help the shipbuilder since it receives payments for contracts in US dollars while the costs of steel and labour are paid in yuan.

Meanwhile, the companies that shed the most value in August included Jardine Strategic Holdings, DBS Group, Jardine Matheson and Thai Beverage.

Index heavyweights like the Jardines and DBS are typically the first to get trimmed when fund managers decide to cut exposure to the Singapore market amid a lack of positive catalysts.

Overall, the market cap of the 736 companies on the Singapore Exchange fell 3 per cent to S$926.2 billion in August, according to data compiled by BT.

This was in step with the Straits Times Index, which finished at 3,213.48 on Friday, down 3.2 per cent since the end of July.

Over the past 10 years, the Singapore market has always ended August lower; the median decline is 2.1 per cent and average drop, 4.2 per cent, DBS Research noted.

In the meantime, how long more defensive stocks stay in favour depends a lot on how weak the market is going to be.