■ STI – 2825 to 3030 over next 1 month
■ MSCI Semi-Annual Index Review – HK Land support at S$7.27 underpinned ahead of cut-in date; HL Asia, Rex, Singhaiyi & Wheelock weak leading to the cut-off date on 30 Nov
Attention turns to ECB and FED policy actions in December. We peg a range for STI of 2825 (11.46x FY16F PE, -1.5SD) to 3030 (c.12.22x FY16F PE, -1SD) over the next one month. At above 2825, there is immediate support at 2890. Meanwhile, any upside over the next few weeks is likely capped at around 3035 and we also note immediate resistance at 2950/75.
The relative strength charts tell us that Singapore stocks are relative underperformers. Singapore’s final 3Q GP will be released on Wednesday. Despite the advanced figure showing the economy narrowly skipping a technical recession, the recently concluded 3Q results season showed that the ‘corporate earnings recession’ has worsened.
In our latest Singapore Strategy report dated 16 November, we stuck to our preference for companies with earnings visibility and yield support such as Sheng Siong and Mapletree Greater China Commercial Trust (MAGIC) as well as those with a potential to unlock value amid the challenging environment – our picks are Capitaland, Fraser Centrepoint Ltd and CapitaLand Retail China Trust.
Changes to the latest MSCI Global Investable Market Indexes Semi-Annual Index Review was announced on 12th Nov and will be implemented at the close of 30th Nov. HK Land will be included in the MSCI HK Index while Hong Leong Asia, Rex International, Singhaiyi and Wheelock Properties will be removed from the MSCI Singapore Index under the small caps category.
For HK Land, which will be included into the MSCI HK Index, we expect the stock to be underpinned leading to and slightly after the cut-in date. We lift immediate support to S$7.27 (from S$7.20). From a trading perspective, stay invested in the stock at least till shortly after the cut-in date on 30th Nov, i.e. at the beginning of December.
The 5 stocks that will be removed from the MSCI Singapore small caps index have reacted negatively since their deletion was announced. We expect weakness leading to the cut-off date on 30th Nov but these stocks should rebound very shortly after the cut-off date. (Read Report)
Source : DBS Group Research