SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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<html><body>#whatstrending Ever wondered what is currently driving the local and regional markets? This new report series address some of the most trending questions/topics on the markets for investors. Designed to be educational, expect to get factual information on what is driving sectors and stocks listed on SGX Q: Singapore has announced further easing of border restrictions and stepped down DORSCON level from orange to yellow. How has this impacted the local equities market? 
Following the reopening of Singapore’s borders to all fully vaccinated travellers from 1 April 2022, Civil Aviation Authority of Singapore (CAAS) reported that air passenger traffic in Singapore reached 400,000 or 31% of pre-COVID levels in the week ending 17 April 2022, up from 18% a month ago. Transport Minister S Iswaran on 4 May stated Changi Airport passenger volumes has more than doubled to reach close to 40% of pre-COVID levels in end-April, up from 18% in March and on track to at least 50% of pre-COVID levels by this year. 
SIA also reported significant increase in passenger demand in its March operating results. The Group carried 893k passengers in March, a 792.1% YoY increase. Its group passenger capacity reached 51% of pre-COVID levels, and expects passenger capacity to reach 61% of pre-COVID levels by May 2022. 
We observed outperformance in the year-to-date for a number of reopening proxies including SATS, SIA, ComfortDelGro, Genting Singapore and SIA Engineering. These five stocks average total returns of 10.6%, outperforming STI’s +7.1% total returns YTD (as of 6 May ’22). On a funds flow perspective, these stocks saw a combined net institutional inflows of S$84.8 million in the YTD. 
The easing of measures also had an impact on the F&amp;B industry in Singapore. The top five actively traded SGX F&amp;B stocks with Singapore exposure are: Jumbo, Japan Foods, Pavillion, RE&amp;S and Kimly. Investors’ focus would be on Singapore’s F&amp;B service sales data for April. 
In the REITs Sector, SGX lists four stapled trusts and one REIT with significant exposure to Singapore hotels who may potentially benefit from reopening borders  - Ascott, CDL HT, Far East HT, Frasers HT, and OUE CREIT. These five trusts generated average total returns of 16.9% YTD (as of 6 May ’22). S-REITs with exposure to Singapore office assets as employees head back to office - Keppel REIT, CICT, Suntec REIT, MCT, and OUE CREIT.</body></html>

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 <img src='https://api2.sgx.com/sites/default/files/2022-05/Capture%201_0.PNG' alt='Mar 22 Changi Airport' />
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 <div class='content-caption'>Mar 22 Changi Airport</div>
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Q: Rate hikes to combat inflation continues to be a focus on investors globally. How is this impacting the markets? Which are the sectors which may see direct impact? 
The 16 March FOMC rate hike was in-line with market’s expectations. At the recent May FOMC, the Fed raised rates by 50bps, with a 75bps hike at the next meeting ruled out for now. Quantitative tightening will begin, with the Fed allowing up to US$47.5 billion/month in combined US treasuries and mortgage-backed securities to run off the balance sheet, increasing to US$95 billion after 3 months 
Rates sensitive sectors such as Financials and REITs typically come into investors’ minds during rate hike/cut cycles.

<ul>
<li>Notably, Singapore Banks – DBS (D05), OCBC (O39), and UOB (U11) has seen an average 7.2% gains since the start of heightened volatility in the markets (8 March), outperforming global banks and the STI. In the same period, the FTSE ST All-Share Index also saw total returns of +5.7%. 
	 </li>
	<li>REITs depend on borrowings/debt to help finance their asset purchases. Higher rates may impact their borrowing costs and dividend distributions. As a reminder, most of the S-REITs have gearing ratios (i.e. total debt/percentage of total assets) of c. 37%, below the regulatory limit of 50%. Further, S-REITs have, on average, also pegged more than 70% of their debt at fixed rates. Notably in this current rate hike environment, the sector (FTSE ST REIT Index) saw total returns of +6.4% from the year-low seen in late January.</li>
</ul>
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 <img src='https://api2.sgx.com/sites/default/files/2022-05/Capture%202.PNG' alt='SREIT historical ' />
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 <div class='content-caption'>SREIT historical </div>


#whatstrending  Ever wondered what is currently driving the local and regional markets? This new report series address some of the most trending questions/topics on the markets for investors. Designed to be educational, expect to get factual information on what is driving sectors and stocks listed on SGX  Q: Singapore has announced further easing of border restrictions and stepped down DORSCON level from orange to yellow. How has this impacted the local equities market?  
Following the reopening of Singapore’s borders to all fully vaccinated travellers from 1 April 2022, Civil Aviation Authority of Singapore (CAAS) reported that air passenger traffic in Singapore reached 400,000 or 31% of pre-COVID levels in the week ending 17 April 2022, up from 18% a month ago. Transport Minister S Iswaran on 4 May stated Changi Airport passenger volumes has more than doubled to reach close to 40% of pre-COVID levels in end-April, up from 18% in March and on track to at least 50% of pre-COVID levels by this year.  
SIA also reported significant increase in passenger demand in its March operating results. The Group carried 893k passengers in March, a 792.1% YoY increase. Its group passenger capacity reached 51% of pre-COVID levels, and expects passenger capacity to reach 61% of pre-COVID levels by May 2022.  
We observed outperformance in the year-to-date for a number of reopening proxies including SATS, SIA, ComfortDelGro, Genting Singapore and SIA Engineering. These five stocks average total returns of 10.6%, outperforming STI’s +7.1% total returns YTD (as of 6 May ’22). On a funds flow perspective, these stocks saw a combined net institutional inflows of S$84.8 million in the YTD.  
The easing of measures also had an impact on the F&amp;B industry in Singapore. The top five actively traded SGX F&amp;B stocks with Singapore exposure are: Jumbo, Japan Foods, Pavillion, RE&amp;S and Kimly. Investors’ focus would be on Singapore’s F&amp;B service sales data for April.  
In the REITs Sector, SGX lists four stapled trusts and one REIT with significant exposure to Singapore hotels who may potentially benefit from reopening borders  - Ascott, CDL HT, Far East HT, Frasers HT, and OUE CREIT. These five trusts generated average total returns of 16.9% YTD (as of 6 May ’22). S-REITs with exposure to Singapore office assets as employees head back to office - Keppel REIT, CICT, Suntec REIT, MCT, and OUE CREIT.


      
    
    Mar 22 Changi Airport


Q: Rate hikes to combat inflation continues to be a focus on investors globally. How is this impacting the markets? Which are the sectors which may see direct impact?  
The 16 March FOMC rate hike was in-line with market’s expectations. At the recent May FOMC, the Fed raised rates by 50bps, with a 75bps hike at the next meeting ruled out for now. Quantitative tightening will begin, with the Fed allowing up to US$47.5 billion/month in combined US treasuries and mortgage-backed securities to run off the balance sheet, increasing to US$95 billion after 3 months  
Rates sensitive sectors such as Financials and REITs typically come into investors’ minds during rate hike/cut cycles.


Notably, Singapore Banks – DBS (D05), OCBC (O39), and UOB (U11) has seen an average 7.2% gains since the start of heightened volatility in the markets (8 March), outperforming global banks and the STI. In the same period, the FTSE ST All-Share Index also saw total returns of +5.7%. 
	 
	REITs depend on borrowings/debt to help finance their asset purchases. Higher rates may impact their borrowing costs and dividend distributions. As a reminder, most of the S-REITs have gearing ratios (i.e. total debt/percentage of total assets) of c. 37%, below the regulatory limit of 50%. Further, S-REITs have, on average, also pegged more than 70% of their debt at fixed rates. Notably in this current rate hike environment, the sector (FTSE ST REIT Index) saw total returns of +6.4% from the year-low seen in late January.




      
    
    SREIT historical 

Navigating global reopening and rate hikes

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<ul>
<li>
Recent easing of COVID-19 measures may potentially be an inflection point for the domestic F&amp;B sector. According to Singstat, F&amp;B sales (seasonally-adjusted) in January ’22 declined 3.5% m-o-m but +9.5% y-o-y 
	 </li>
	<li>
Local F&amp;B sector represents 1.1% of Singapore’s GDP and employs 5.5% of total workforce. Pandemic has led to a pivot in their businesses with supportive government policies.  
</li>
	<li>The five most actively F&amp;B plays with domestic exposure are Kimly, Jumbo Group, Japan Foods, Pavillon and RE&amp;S Holdings</li>
</ul>
 

Easing of COVID-19 Measures a Potential Inflection Point? 
Recent announcement of easing of COVID-19 measures in Singapore is potentially a positive inflection point for the local food &amp; beverage (F&amp;B) sector. With effect from 29 March 2022, some of the more notable easing measures include: doubling of group sizes for social gatherings/dinings from five to 10 people, resumption of larger social gatherings, full reopening of borders to fully vaccinated travelers (w.e.f. 1 Apr) lifting of restriction on sale and consumption of alcohol after 10.30pm, resumption of live performances at all venues. 
According to SingStat, total F&amp;B services sales in January ’22 declined 3.5% m-o-m (higher base in December) on a seasonally-adjusted basis, largely contributed by Restaurants (-5.4%) and Café/Food Courts/Others (-3.2%). On a y-o-y basis however, January y-o-y sales was at +9.5% improving from the +7.3% seen in December 2021.
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 <img src='https://api2.sgx.com/sites/default/files/2022-03/Capture_30.PNG' alt='Singapore F&B Services index' />
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 <div class='content-caption'>Singapore F&B Services index</div>
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Source: Singstat

Note: Food &amp; beverage services refers to the sales of prepared food and drinks for in-premises consumption or on a take-away basis. All eating places are included except hawker stalls Local Food Services Industry Pivots in a Post Pandemic World 
Singapore’s food services industry represents around 1.1% of Singapore’s GDP and employs about 5.5% of its workforce (according to a Straits Times article). Since the start of the pandemic, many eateries and restaurants have pivoted, accelerating digital adoption to cater to online and delivery sales. 
To help businesses transform and overcome challenges, the Ministry of Trade and Industry (MTI) has also launched a number of supportive initiatives. In March 2022, a S$70 million Food Services and Retail Business Revitalisation Package was launched to support such businesses. Top Five Active Traded SGX F&amp;B Stocks with Singapore Exposure 
The top 5 active traded SGX F&amp;B stocks with Singapore exposure are:

<ul>
<li>
Kimly (1D0): One of the leading traditional coffee shop operators in Singapore</li>
	<li>
Jumbo Group (42R): One of Singapore’s leading multi-dining concept F&amp;B establishments</li>
	<li>
Japan Foods (5OI): Amongst the leading F&amp;B groups in Singapore specialising in quality and authentic Japanese cuisine</li>
	<li>
Pavillon (596): Operator of Thai Village chain of restaurants</li>
	<li>
RE&amp;S Holdings (1G1): Leading concept owner and operator of F&amp;B outlets serving authentic Japanese cuisine</li>
</ul>
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Recent easing of COVID-19 measures may potentially be an inflection point for the domestic F&amp;B sector. According to Singstat, F&amp;B sales (seasonally-adjusted) in January ’22 declined 3.5% m-o-m but +9.5% y-o-y 
	 
	
Local F&amp;B sector represents 1.1% of Singapore’s GDP and employs 5.5% of total workforce. Pandemic has led to a pivot in their businesses with supportive government policies.  

	The five most actively F&amp;B plays with domestic exposure are Kimly, Jumbo Group, Japan Foods, Pavillon and RE&amp;S Holdings

 

Easing of COVID-19 Measures a Potential Inflection Point?  
Recent announcement of easing of COVID-19 measures in Singapore is potentially a positive inflection point for the local food &amp; beverage (F&amp;B) sector. With effect from 29 March 2022, some of the more notable easing measures include: doubling of group sizes for social gatherings/dinings from five to 10 people, resumption of larger social gatherings, full reopening of borders to fully vaccinated travelers (w.e.f. 1 Apr) lifting of restriction on sale and consumption of alcohol after 10.30pm, resumption of live performances at all venues.  
According to SingStat, total F&amp;B services sales in January ’22 declined 3.5% m-o-m (higher base in December) on a seasonally-adjusted basis, largely contributed by Restaurants (-5.4%) and Café/Food Courts/Others (-3.2%). On a y-o-y basis however, January y-o-y sales was at +9.5% improving from the +7.3% seen in December 2021.



      
    
    Singapore F&B Services index


Source: Singstat

Note: Food &amp; beverage services refers to the sales of prepared food and drinks for in-premises consumption or on a take-away basis. All eating places are included except hawker stalls   Local Food Services Industry Pivots in a Post Pandemic World  
Singapore’s food services industry represents around 1.1% of Singapore’s GDP and employs about 5.5% of its workforce (according to a Straits Times article). Since the start of the pandemic, many eateries and restaurants have pivoted, accelerating digital adoption to cater to online and delivery sales.  
To help businesses transform and overcome challenges, the Ministry of Trade and Industry (MTI) has also launched a number of supportive initiatives. In March 2022, a S$70 million Food Services and Retail Business Revitalisation Package was launched to support such businesses.  Top Five Active Traded SGX F&amp;B Stocks with Singapore Exposure  
The top 5 active traded SGX F&amp;B stocks with Singapore exposure are:



Kimly (1D0): One of the leading traditional coffee shop operators in Singapore
	
Jumbo Group (42R): One of Singapore’s leading multi-dining concept F&amp;B establishments
	
Japan Foods (5OI): Amongst the leading F&amp;B groups in Singapore specialising in quality and authentic Japanese cuisine
	
Pavillon (596): Operator of Thai Village chain of restaurants
	
RE&amp;S Holdings (1G1): Leading concept owner and operator of F&amp;B outlets serving authentic Japanese cuisine




An Inflection Point for Singapore F&B Sector?

Japan

JAPAN FOODS CO., LTD. produces various bottled and canned beverages through beverage producers such as Ito En, Sapporo Breweries, and Calpis.  Japan Foods also produces soft drinks for cafeteria-use.

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Japan Foods (2599 JP)

Navigating global reopening and rate hikes

#whatstrendingEver wondered what is currently driving the local and regional markets? This new report series address some of the most trending...

Singapore Exchange Ltd (SGX)

An Inflection Point for Singapore F&B Sector?

Recent easing of COVID-19 measures may potentially be an inflection point for the domestic F&B sector. According to Singstat, F&B sales...

Singapore Exchange Ltd (SGX)

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