Singapore’s market cap up 2.5% in July as investors shrug off inflation, recession fears
Uma Devi
DESPITE rising inflationary pressures and threats of a global recession, the total value of Singapore stocks advanced in July. Outperformers included stable blue chips, market watchers said, as investors sought safe havens.
The total market capitalisation of the 650 counters listed on the Singapore Exchange (SGX) rose by 2.5 per cent or S$21.2 billion month on month (m-o-m) — to S$882.7 billion at end-July from S$861.4 billion at end-June. Nevertheless, losers outnumbered gainers 252 to 228.
Blue-chip counters led the increase in value. The combined value of the 30 Straits Times Index (STI) stocks was up 4 per cent, or S$20.4 billion, to S$534.5 billion.
Mainboard-listed stocks also had a good run in July. Their total value rose 2.5 per cent or S$21.3 billion m-o-m to S$873.1 billion. Catalist-listed counters, however, fell 0.9 per cent or S$0.1 billion in value to S$9.5 billion.
On a m-o-m basis, the biggest gainer in value was Mapletree Commercial Trust (MCT), which added about S$5.8 billion in July.
MCT issued more than 1.9 billion new units (including a preferential offering) during the month to effect its merger with Mapletree North Asia Commercial Trust. The merged entity will be named Mapletree Pan Asia Commercial Trust with effect from Aug 3.
The trust also reported an improved financial performance for its first fiscal quarter ended June, due to the easing of Covid-19 measures. Thanks to lower rental rebates and higher contribution from VivoCity, MCT reported an 8.8 per cent growth in revenue for Q1 to S$135 million, while net property income rose 10.1 per cent to S$106.7 million.
The three local lenders were also among the biggest gainers by value in July. DBS added S$4.6 billion; UOB gained S$2.2 billion; and OCBC rose S$1.3 billion.
The recent spate of interest rate hikes by the US Federal Reserve has thrust the banking trio into the spotlight. While their wealth management income segments are likely to take a hit from weak market sentiment, they are expected to benefit from wider net interest margins.
Analysts have noted that the proportion of the banks’ total deposits held under current accounts and savings accounts has improved over the course of the pandemic.
Newly-listed Chinese electric vehicle maker Nio was the biggest loser in July, shedding US$6.7 billion in value. In June, short-seller Grizzly Research alleged that the company had inflated its revenue and net income margins.
Nio has denied the allegations. On Jul 11, the company said it had formed a committee to oversee an independent investigation into the matter.
Other top decliners by value on SGX included First Resources , City Developments and Top Glove.
SGX market strategist Geoff Howie said institutional investors were net sellers of Singapore stocks in July, accounting for approximately S$100 million of net outflows. Real estate (excluding real estate investment trusts), banks and other financial services booked the biggest outflows; while telecommunications, industrials and utilities had the biggest net inflows.
Looking ahead, Howie said slowing growth and higher inflation will continue to dominate market sentiment. He sees an increasing focus on the actions of the United States Federal Reserve.
RHB Singapore’s head of equity research Shekhar Jaiswal echoed this sentiment. “Inflation and the resultant rise in interest rates are the biggest concerns plaguing global and Singapore markets,” he said. “While supply constraints and a tight labour market are helping to nudge inflation higher, we expect inflation to moderate by year-end.”
For now, Jaiswal said debt levels for stocks under the brokerage’s coverage are manageable as these companies have built up sufficient liquid assets during the post-pandemic recovery.
He expects Singapore stocks to deliver positive earnings growth in 2022, although earnings growth will moderate in H2 alongside slowing economic growth. RHB has lowered its 2022 year-on-year earnings growth forecast for stocks under its coverage to 13 per cent, from 16 per cent previously.
While he remains optimistic about the STI delivering positive returns in 2022, he reckons an upward move for the index will be “a slow grind”.
His key themes for H2 include banks, as a proxy to rising interest rates and for their undemanding valuations; continued exposure to stocks that will benefit from economic re-opening and living with Covid-19; as well as defensive Reits.
Key downside risks, Jaiswal added, include higher-than-expected commodity prices, rising geopolitical turmoil, an acceleration in inflation and a faster-than-expected rise in interest rates - all of which could lead to a marked slowdown in global economic growth.
