To The Moon

By Geoff Howie, Singapore Exchange’s Market Strategist，author of the SGX My Gateway Report.

Geoff Howie

The $Straits Times Index(STI.SI)$ generated a 4.1% price gain in 2022, with reinvested dividends bringing the total return to 8.4%.

For much of the year, the STI was among the strongest stock market benchmarks across the globe, and for the majors finished the calendar year just 1.0% behind Brazil’s $LYXOR BRAZIL (IBOVESPA) - ACC(RIOU.UK)$ Index. This means the STI well outpaced Indices across the Asia Pacific and Developed Economies across the globe over the year.

The $STI ETF(ES3.SI)$ also remained the most traded stock index among Singapore ETF investors in 2022, with the two STI tracking ETFs recording a combined trading turnover of S$1.06 billion in 2022. This was 25% higher than the next most traded index, the Hang Seng TECH Index $HSTECH(HSTECH)$ which traded S$850 million over 2022. Primary market unit creations and redemptions for the two STI ETFs, crossed S$553 million over the period with fluid economic developments producing a close to 500-point range for the STI in 2022, up from near 440 points in 2021.

For the 2022 year, the trio of $DBS GROUP HOLDINGS LTD(D05.SI)$ , $OVERSEA-CHINESE BANKING CORP(O39.SI)$ and $UNITED OVERSEAS BANK LIMITED(U11.SI)$ ended 2022 with a 46.9% weight in the STI. The trio averaged 13% total returns over the year.

Data from Tradingview, as of Jan 9th

On the back of higher interest rates, the trio of banks have reported eight consecutive quarters of QoQ NII growth, with the combined 3Q22 NII at S$7.4 billion, up S$1.3 billion from 2Q22. At the same the trio continued to grow loan books in 2022 within the mid-single digit percentage growth guidance, while 3Q22 also saw the trio reduce NPL ratios from 2Q22.

Going into 2023, DBS, OCBC and UOBalso rank among the 10 largest weights of the FTSE Developed APAC ex-Japan Sustainable Yield Index which tilts towards the financial and operating strength of stocks with specific emphasis on companies with strong balance sheets and the ability to generate cash flow, rather than extreme high yield.

By comparison, the Bank Sector makes up 6.3% of the FTSE Developed Index and 7.3% of the FTSE All-World Index, which maintain the most Sector exposure to Technology, which was the least performing sector of 2022. Aside from secular sector performances, growth outlooks also impacted index performances, with the comparative strength of the Singapore Dollar to the US Dollar also a contributing factor to the STI’s comparative performance.

In 2022, $SINGTEL(Z74.SI)$ led the net fund inflows for the Singapore stock market, from 1Q22 onwards. $KEPPEL CORPORATION LIMITED(BN4.SI)$ and $CITY DEVELOPMENTS LIMITED(C09.SI)$ also ranked among the five stocks that booked the highest net fund inflows for the year.

All four of three of these stocks have been among the group of stocks that have been pursuing strategic initiatives to add shareholder value, which has involved acquisitions, disposals, restructuring or pivots to new revenue streams. Singtel's 1HFY23 (end 30 Sep) net profit came to S$1.2 billion which was boosted by the S$1 billion net exceptional gain from the group's partial divestment of its stake in Airtel. This had followed the Group's divestment of its 70% equity stake in Australia Tower Network which boosted its top line for FY22 (ended 31 Mar).

Data from Tradingview, as of Jan 9th

Also, in 1HFY23, NCS, which has been repositioned as the Group's digital champion, continued to capitalise on the digitalisation trend to add new bookings of S$1.3 billion with the order book now at S$3.5 billion. $KEPPEL CORPORATION LIMITED(BN4.SI)$ has continued to accelerate its transformation to an integrated sustainable urbanisation solutions provider, under its Vision 2030. Since the launch of its asset monetisation program in Sep 2020, the Group has achieved close to S$4.4 billion in monetisation, and is confident of exceeding its target of S$5 billion of asset monetisation before the end of 2023. Keppel Corporation also led the share buyback consideration tally for primary-listed Singapore stocks in the 2022 calendar year, conducting S$500 million in buybacks, compared to less than S$15 million in 2021.

While City Developments and Singtel benefited from re-opening momentum, City Developments continue to accelerate its Growth, Enhancement and Transformation (GET) Strategy which includes capital recycling to ‘realise the deep, latent value from its assets’. The sale of Millennium Hilton Seoul as well as the successful collective sale exercises for Tanglin Shopping Centre and Golden Mile Complex, have helped provide the Group with adequate financial headroom to deleverage, seek opportunistic investments and maximise shareholder value.

https://www.straitstimes.com/

Looking ahead, February through to March will be paramount for 2023 corporate outlooks with close to 400 stocks due to report their FY22s.Therecent MAS Survey of Professional Forecastersrespondents who provided inputs, 50% of respondents expect corporate profits to remain stable year-on-year in 4Q22, while a third anticipate higher profits and the remainder expect profits to decline.

Global stock and bond markets did price in moderate recessionary pressures in 2022. Given the trade-centred nature of the Singapore economy, weakening global demand, supply chain challenges and operational cost pressures are the key global themes expected to remain in the spotlight well into 2023. This year Singapore’s inflation rate is expected to come in at similar levels to 2022, due to the ongoing impact of global inflation, and the added impact of the 1% increase in GST effective 1 Jan.

However, the outlook remains fluid, driven by both global demand and supply factors, such as growth outlooks, the prices of energy and food, and wage pressures from tight labour markets, and other supply chain constraints. On a final note, just as Singapore’s manufacturing,wholesale trade, finance & insurance, and information & communications, were positively impacted by the 2021 global rebound, they would be expected to be impacted by further 2023 global growth moderation.