Short-term profit-taking likely on latest round of Covid curbs

Singapore

ANALYSTS are foreseeing a trend of profit-taking on the Singapore bourse as the Republic reinstates pre-emptive safety measures from May 8 to 30.

This comes amid a rise in Covid-19 community cases, including a cluster at Tan Tock Seng Hospital detected the past week.

The sell-off has already started, with Singapore shares swimming in a sea of red during the early morning trading session on Wednesday. As at the midday trading break, all index counters except Jardine Matheson Holdings were down.

When the market opened on Wednesday, decliners outnumbered gainers 98 to 30, or three down for every one up, a ratio not seen the past five days of trading - which has been largely even, according to a tally by The Business Times.

So far, the Straits Times Index (STI) has hit a one-month low, reaching 3,145.20 as at 9.04am on Wednesday. The last time the STI closed near this level was on March 25 at 3,141.71.

For CGS-CIMB, year-to-date performers such as banks and travel-related stocks like Singapore Airlines and Sats will likely see a hit on share performance in the short term.

Reduced activities will likely hit transport stocks such as ComfortDelGro and SBS Transit, as well as retail Reits and other re-opening beneficiaries like Genting Singapore and Jumbo.

Office Reits are less likely to be affected due to existing hybrid work-from-home and office structures. Meanwhile, sentiment among developers and realtors could be slightly affected if transaction volumes take a breather from more virtual versus physical viewings, CGS-CIMB said.

Overall, Citi sees industrial Reits being the least impacted by the stricter measures. The research team expects investors to stay in its top three picks - Mapletree Industrial Trust (MIT), Mapletree Logistics Trust, and Frasers Logistics & Commercial Trust (FLCT).

Similarly, RHB expects interest to rotate to industrial Reits - which have underperformed in the year to date relative to retail and office Reits. It continues to recommend that investors employ a balanced investment strategy.

On May 4, DBS also maintained a preference for logistic-focused names such as MIT and FLCT, given the "expected earnings resilience". This is while noting that earnings of MIT and other large-cap industrial Reits may "surprise on the upside".

Uncertainty over a potential circuit breaker could also see renewed interest in pandemic beneficiaries. These include supermarket plays such as Sheng Siong and Dairy Farm, as well as glove-sector stocks such as UG Healthcare and Riverstone.

A heightened pace of testing will also benefit healthcare proxies such as Q&M Dental and Raffles Medical, CGS-CIMB said.

Maybank Kim Eng said Q&M will likely benefit due to its exposure to the Covid-19 tests business. The research team initiated coverage on the stock in March with "buy" and a target price of S$0.87. Maybank KE also expects Q&M to "close the valuation gap" against bigger listed peers due to a superior earnings trajectory at CGS-CIMB's estimate of 58 per cent, 20 per cent and 13 per cent for FY2021, FY2022 and FY2023 respectively.