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Budget 2018 - SG Bonus from bumper surplus

Shared By Stock Fanatic on Tuesday, February 20, 2018 | 20.2.18

■ Bumper budget surplus of S$9.6b for 2017

■ Higher buyers’ stamp duty on residential properties

■ GST increase deferred till 2021 or beyond, positive for consumer sector – Buy Genting Singapore

■ Reiterate positive stance on STI. Favour banks, oil and gas, consumer plays

Bumper budget surplus. Singapore ended 2017 with a bumper budget surplus of S$9.6 billion (2.1% of GDP) for FY2017, highest in the last 20 years. The increase was mainly due to exceptional statutory Board contribution (mainly MAS) and boosted by stamp duties from a buoyant property market. With this, the government will dish out SG bonus of between S$100- S$300 each, costing S$700m. In addition, the much anticipated increase in GST from 7% to 9% has been deferred to 2021 and beyond. This should be positive for consumer spending and sentiment. Genting Singapore, which was sold down last week on GST concerns, should see a good rebound.

2018 budget will be expansionary, in particular a S$5b rail infrastructure fund will be set up. Key beneficiary of rail infrastructure projects is ST Engineering, which is a likely contender for the SG-KL high speed rail project.

Increase in buyers’ stamp duties from 3% – 4% for residential property purchases could slow en-bloc deals. The impact is small on residential home purchases; we estimate for a S$2.0m property, the effective tax rate is expected to increase by only 0.5 basis points from 2.7% to 3.2%, and is unlikely to affect the affordability of home buyers. However, this could impact en-bloc deals of developers looking to top up their land bank.

Extension of wage credit scheme positive for SMEs, consumer companies. The extension of wage credit scheme benefit companies with large workforce within the lower income group – consumer services, oil and gas, construction sectors. This could have a positive impact of 1% to 4% on our forecasts for these consumer companies - HRnet, Sheng Siong, Jumbo Group.

Base building for STI. Reiterate our positive stance on the market, STI has been resilient and is base building for the next uptrend. We continue to like banks, while expecting rotational interest in oil / gas, SMC and consumer sector to be sustained. Stock picks : UOB, OCBC, Keppel Corp, SembCorp Marine, Genting Singapore, HRNet, SingPost, Breadtalk. (Read Report)

Source : DBS Group Research

Posted on Tuesday, February 20, 2018 | 20.2.18
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