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.

Asia’s leading multi-asset exchange

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

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

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Five of Singapore’s 10 stocks with the highest positive quality factor exposure (with high ROE and low Debt-to-Equity) represent the Technology Sector and include AEM, Valuetronics, Silverlake Axis, Venture and UMS.  
	 </li>
	<li>
Together the 10 stocks have generated positive average (+13%) and median (+15%) total returns since the STI made its 9 June 2839 high. Just one of the 10 stocks, SATS, underperformed the STI’s 7.5% decline in total return over the period with a 9.8% decline. 
	 </li>
	<li>Of the 10 stocks, those recipient to net institutional inflow in both the 2020 year-to-date and the 9 June to 26 August period included AEM, Venture, UMS and PropNex with the four stocks averaging 23% total returns since the STI high on 9 June. </li>
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Singapore Stocks Ranked with Most Positive Quality Factors 
As detailed in the recent Factor Investing in Singapore Report by Nicolas Rabener (click <a href="https://www.factorresearch.com/research-factor-investing-in-singapore">here</a> for full report, Quality is one of five Factors used by modern day analysts to characterise stocks.) 
Two key Quality Factors used by FactorResearch, and the broader research community, include financial returns and debt, both expressed in terms of the stocks’ total equity.  The Factor Investing in Singapore Report, which was completed in collaboration with Singapore Exchange, ranked more than 100 stocks according to their Quality Factors. The 10 stocks that were amongst those with the most positive quality factor included AEM Holdings, China Sunsine Chemical Holdings, Valuetronics Holdings, Silverlake Axis, PropNex, Venture Corporation, SATS, Sheng Siong Group, UMS Holdings and  Tianjin Zhongxin Pharmaceutical Co. 
As a group, the 10 stocks outpaced the Straits Times Index (‘STI’) since the benchmark made its recent high of 2839 on 9 June and since the end of 2019, through to 26 August. The comparative median total return of the 10 stocks, relative to the STI total return is illustrated below.
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 <div class='content-caption'>Median of 10 stocks with highest positive quality factors</div>
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Traditionally, Index providers and investors have grouped stocks according to their asset class, the country in which they are listed or conduct their business, the highly cyclical or less cyclical sector they represent, in addition to their liquidity. Factor investing is a relatively new method of grouping, that looks to link past and potential performances of stocks according to common factor attributes. Company Financials &amp; Economic Cycles 
Common Quality Factor attributes can include net profit margins, return on equity and invested capital, or the degree of financial leverage and accrued income, and the Factor Investing in Singapore Report used an equal-weight combination of return-on-equity (‘ROE’) and debt-to-equity (‘DTE’) ranking stocks with the highest ROE and lowest DTE.  Such financials can attract much investor attention in economic downturns. The Factor Investing in Singapore report also noted that based on long term stock market and economic data in the United States - quality stocks tended to outperform in both economic slowdowns (along with momentum and low volatility) and economic recessions (along with low volatility and value). Quality stocks were not observed to outperform in recovery and growth phases. Ranking Stocks by Quality Factors 
The table below provides the list of stocks that are amongst the largest and most traded Singapore stocks that demonstrated the highest positive quality factors. As noted above this was based on ROE and DTE financial metrics.  The 10 stocks, sort by the highest positive Quality Factor at the time Factor Investing in Singapore report was published are tabled below.

<table class="table table-striped"><tbody>
<tr>
<td>
			Stock
			</td>
			<td>
			SGX 

			Code
			</td>
			<td>
			Mkt Cap (S$M)
			</td>
			<td>
			YTD Average Daily Turnover (S$M)
			</td>
			<td>
			YTD Total Return %
			</td>
			<td>
			9 June - 26 Aug Total Return %
			</td>
			<td>
			ROE %
			</td>
			<td>
			Long Term Debt to Equity %
			</td>
		</tr>
<tr>
<td>
			AEM
			</td>
			<td>
			AWX
			</td>
			<td>
			1123.4
			</td>
			<td>
			      21.15
			</td>
			<td>
			104.5
			</td>
			<td>
			32.4
			</td>
			<td>
			47.1
			</td>
			<td>
			0.4
			</td>
		</tr>
<tr>
<td>
			China Sunsine
			</td>
			<td>
			QES
			</td>
			<td>
			345.2
			</td>
			<td>
			         0.26
			</td>
			<td>
			-29.3
			</td>
			<td>
			-2.7
			</td>
			<td>
			15.9
			</td>
			<td>
			0.4
			</td>
		</tr>
<tr>
<td>
			Valuetronics
			</td>
			<td>
			BN2
			</td>
			<td>
			243.6
			</td>
			<td>
			         1.86
			</td>
			<td>
			-28.7
			</td>
			<td>
			1.7
			</td>
			<td>
			15.0
			</td>
			<td>
			0.1
			</td>
		</tr>
<tr>
<td>
			Silverlake Axis
			</td>
			<td>
			5CP
			</td>
			<td>
			789.8
			</td>
			<td>
			         1.64
			</td>
			<td>
			-25.0
			</td>
			<td>
			19.6
			</td>
			<td>
			44.0
			</td>
			<td>
			10.6
			</td>
		</tr>
<tr>
<td>
			PropNex
			</td>
			<td>
			OYY
			</td>
			<td>
			218.3
			</td>
			<td>
			         0.15
			</td>
			<td>
			22.6
			</td>
			<td>
			13.8
			</td>
			<td>
			29.4
			</td>
			<td>
			4.1
			</td>
		</tr>
<tr>
<td>
			Venture
			</td>
			<td>
			V03
			</td>
			<td>
			5888.0
			</td>
			<td>
			      24.77
			</td>
			<td>
			29.4
			</td>
			<td>
			30.7
			</td>
			<td>
			15.0
			</td>
			<td>
			0.7
			</td>
		</tr>
<tr>
<td>
			SATS
			</td>
			<td>
			S58
			</td>
			<td>
			3308.3
			</td>
			<td>
			      23.26
			</td>
			<td>
			-41.5
			</td>
			<td>
			-9.8
			</td>
			<td>
			10.3
			</td>
			<td>
			30.4
			</td>
		</tr>
<tr>
<td>
			Sheng Siong
			</td>
			<td>
			OV8
			</td>
			<td>
			2631.2
			</td>
			<td>
			         6.44
			</td>
			<td>
			45.5
			</td>
			<td>
			17.2
			</td>
			<td>
			25.1
			</td>
			<td>
			9.7
			</td>
		</tr>
<tr>
<td>
			UMS
			</td>
			<td>
			558
			</td>
			<td>
			538.8
			</td>
			<td>
			         7.46
			</td>
			<td>
			1.8
			</td>
			<td>
			16.5
			</td>
			<td>
			14.2
			</td>
			<td>
			3.0
			</td>
		</tr>
<tr>
<td>
			Tianjin ZX USD
			</td>
			<td>
			T14
			</td>
			<td>
			2199.0
			</td>
			<td>
			         0.53
			</td>
			<td>
			7.0
			</td>
			<td>
			10.1
			</td>
			<td>
			12.1
			</td>
			<td>
			0.6
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			8.6
			</td>
			<td>
			12.9
			</td>
			<td>
			22.8
			</td>
			<td>
			6.0
			</td>
		</tr>
<tr>
<td>
			Median
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			4.4
			</td>
			<td>
			15.1
			</td>
			<td>
			15.5
			</td>
			<td>
			1.8
			</td>
		</tr>
</tbody></table>
 Note stocks were screened from a list of more than 100 stocks that include the STI constituents, REITs and a number of other stocks that maintain either comparatively large market capitalisation or a higher tradability metric than industry peers, with this Market Updates excluding Singapore Exchange from the analysis. Source: Factor Investing in Singapore Report (click <a href="https://www.factorresearch.com/research-factor-investing-in-singapore">here</a>), SGX StockFacts and Bloomberg (Data as of 26 August 2020).

 

Since the STI formed its 2839 high on 9 June, it has declined by 9.0%, with dividend distributions trimming that decline to 7.5%. During this time, just one of the 10 stocks has underperformed the STI, with SATS declining 9.8%.  Of the 10 stocks tabled above, SATS maintained the highest long-term debt to equity ratio. As noted in its most recent Annual Report, SATS increased its Group total debt to S$624.4 million in FY20 (ending 31 March) from S$95.7 million in FY19, which included increasing Company total debt to S$468.9 million in FY20, from S$95.4 million in FY19. This was to strengthen the Group’s balance sheet, hence allowing the Group to weather the impact from COVID-19 pandemic. 
The next five stocks that ranked the highest in the Quality Factor were China Aviation Oil, Frencken, SIA Engineering, ST Engineering and Hi-P International.  Quality Leaders with Net Institutional Inflow in 2020 YTD 
Four of the 10 stocks have been recipient to net institutional inflow in both the 2020 year-to-date and the 9 June to 26 August period included. These four stocks included AEM Holdings, Venture Corporation, UMS Holdings and PropNex with the four stocks averaging 23% total returns since the STI high made its 2839 high on 9 June. 
PropNex’s primary business is in the provision of real estate brokerage services comprising real estate agency and project marketing services – this week a 10 in 10 Report (10 questions in 10 minutes with SGX-listed companies) was published for PropNex and can be read <a href="https://api2.sgx.com/sites/default/files/market-dialogues/migration/10%20in%2010%20with%20PropNex%20-%20Home%20Buying%20Reimagined%20%2825Aug2020%29.pdf">here</a>. In the Spotlight: Factor Investing in Singapore Webinar 
Nicolas Rabener is the Founder &amp; CEO of FactorResearch. The FactorResearch team provides quantitative solutions for factor investing in equity markets globally. To watch FactorResearch’s 11 August webinar with the SGX Academy that delved deeper into the performance of classic equity factors in Singapore, such as value, growth, size, momentum, volatility, quality – click <a href="https://www.facebook.com/watch/live/?v=1555084207991052&amp;ref=watch_permalink">here</a>.
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Five of Singapore’s 10 stocks with the highest positive quality factor exposure (with high ROE and low Debt-to-Equity) represent the Technology Sector and include AEM, Valuetronics, Silverlake Axis, Venture and UMS.   
	 
	
Together the 10 stocks have generated positive average (+13%) and median (+15%) total returns since the STI made its 9 June 2839 high. Just one of the 10 stocks, SATS, underperformed the STI’s 7.5% decline in total return over the period with a 9.8% decline. 
	 
	Of the 10 stocks, those recipient to net institutional inflow in both the 2020 year-to-date and the 9 June to 26 August period included AEM, Venture, UMS and PropNex with the four stocks averaging 23% total returns since the STI high on 9 June. 

 

Singapore Stocks Ranked with Most Positive Quality Factors  
As detailed in the recent Factor Investing in Singapore Report by Nicolas Rabener (click here for full report, Quality is one of five Factors used by modern day analysts to characterise stocks.)  
Two key Quality Factors used by FactorResearch, and the broader research community, include financial returns and debt, both expressed in terms of the stocks’ total equity.  The Factor Investing in Singapore Report, which was completed in collaboration with Singapore Exchange, ranked more than 100 stocks according to their Quality Factors. The 10 stocks that were amongst those with the most positive quality factor included AEM Holdings, China Sunsine Chemical Holdings, Valuetronics Holdings, Silverlake Axis, PropNex, Venture Corporation, SATS, Sheng Siong Group, UMS Holdings and  Tianjin Zhongxin Pharmaceutical Co.  
As a group, the 10 stocks outpaced the Straits Times Index (‘STI’) since the benchmark made its recent high of 2839 on 9 June and since the end of 2019, through to 26 August. The comparative median total return of the 10 stocks, relative to the STI total return is illustrated below.



      
    
    Median of 10 stocks with highest positive quality factors


Traditionally, Index providers and investors have grouped stocks according to their asset class, the country in which they are listed or conduct their business, the highly cyclical or less cyclical sector they represent, in addition to their liquidity. Factor investing is a relatively new method of grouping, that looks to link past and potential performances of stocks according to common factor attributes.  Company Financials &amp; Economic Cycles  
Common Quality Factor attributes can include net profit margins, return on equity and invested capital, or the degree of financial leverage and accrued income, and the Factor Investing in Singapore Report used an equal-weight combination of return-on-equity (‘ROE’) and debt-to-equity (‘DTE’) ranking stocks with the highest ROE and lowest DTE.  Such financials can attract much investor attention in economic downturns.  The Factor Investing in Singapore report also noted that based on long term stock market and economic data in the United States - quality stocks tended to outperform in both economic slowdowns (along with momentum and low volatility) and economic recessions (along with low volatility and value). Quality stocks were not observed to outperform in recovery and growth phases.  Ranking Stocks by Quality Factors   
The table below provides the list of stocks that are amongst the largest and most traded Singapore stocks that demonstrated the highest positive quality factors. As noted above this was based on ROE and DTE financial metrics.  The 10 stocks, sort by the highest positive Quality Factor at the time Factor Investing in Singapore report was published are tabled below.




			Stock
			
			
			SGX 

			Code
			
			
			Mkt Cap (S$M)
			
			
			YTD Average Daily Turnover (S$M)
			
			
			YTD Total Return %
			
			
			9 June - 26 Aug Total Return %
			
			
			ROE %
			
			
			Long Term Debt to Equity %
			
		


			AEM
			
			
			AWX
			
			
			1123.4
			
			
			      21.15
			
			
			104.5
			
			
			32.4
			
			
			47.1
			
			
			0.4
			
		


			China Sunsine
			
			
			QES
			
			
			345.2
			
			
			         0.26
			
			
			-29.3
			
			
			-2.7
			
			
			15.9
			
			
			0.4
			
		


			Valuetronics
			
			
			BN2
			
			
			243.6
			
			
			         1.86
			
			
			-28.7
			
			
			1.7
			
			
			15.0
			
			
			0.1
			
		


			Silverlake Axis
			
			
			5CP
			
			
			789.8
			
			
			         1.64
			
			
			-25.0
			
			
			19.6
			
			
			44.0
			
			
			10.6
			
		


			PropNex
			
			
			OYY
			
			
			218.3
			
			
			         0.15
			
			
			22.6
			
			
			13.8
			
			
			29.4
			
			
			4.1
			
		


			Venture
			
			
			V03
			
			
			5888.0
			
			
			      24.77
			
			
			29.4
			
			
			30.7
			
			
			15.0
			
			
			0.7
			
		


			SATS
			
			
			S58
			
			
			3308.3
			
			
			      23.26
			
			
			-41.5
			
			
			-9.8
			
			
			10.3
			
			
			30.4
			
		


			Sheng Siong
			
			
			OV8
			
			
			2631.2
			
			
			         6.44
			
			
			45.5
			
			
			17.2
			
			
			25.1
			
			
			9.7
			
		


			UMS
			
			
			558
			
			
			538.8
			
			
			         7.46
			
			
			1.8
			
			
			16.5
			
			
			14.2
			
			
			3.0
			
		


			Tianjin ZX USD
			
			
			T14
			
			
			2199.0
			
			
			         0.53
			
			
			7.0
			
			
			10.1
			
			
			12.1
			
			
			0.6
			
		


			Average
			
			
			 
			
			
			 
			
			
			 
			
			
			8.6
			
			
			12.9
			
			
			22.8
			
			
			6.0
			
		


			Median
			
			
			 
			
			
			 
			
			
			 
			
			
			4.4
			
			
			15.1
			
			
			15.5
			
			
			1.8
			
		

 Note stocks were screened from a list of more than 100 stocks that include the STI constituents, REITs and a number of other stocks that maintain either comparatively large market capitalisation or a higher tradability metric than industry peers, with this Market Updates excluding Singapore Exchange from the analysis. Source: Factor Investing in Singapore Report (click here), SGX StockFacts and Bloomberg (Data as of 26 August 2020).

 

Since the STI formed its 2839 high on 9 June, it has declined by 9.0%, with dividend distributions trimming that decline to 7.5%. During this time, just one of the 10 stocks has underperformed the STI, with SATS declining 9.8%.  Of the 10 stocks tabled above, SATS maintained the highest long-term debt to equity ratio. As noted in its most recent Annual Report, SATS increased its Group total debt to S$624.4 million in FY20 (ending 31 March) from S$95.7 million in FY19, which included increasing Company total debt to S$468.9 million in FY20, from S$95.4 million in FY19. This was to strengthen the Group’s balance sheet, hence allowing the Group to weather the impact from COVID-19 pandemic.  
The next five stocks that ranked the highest in the Quality Factor were China Aviation Oil, Frencken, SIA Engineering, ST Engineering and Hi-P International.   Quality Leaders with Net Institutional Inflow in 2020 YTD   
Four of the 10 stocks have been recipient to net institutional inflow in both the 2020 year-to-date and the 9 June to 26 August period included. These four stocks included AEM Holdings, Venture Corporation, UMS Holdings and PropNex with the four stocks averaging 23% total returns since the STI high made its 2839 high on 9 June.  
PropNex’s primary business is in the provision of real estate brokerage services comprising real estate agency and project marketing services – this week a 10 in 10 Report (10 questions in 10 minutes with SGX-listed companies) was published for PropNex and can be read here.  In the Spotlight: Factor Investing in Singapore Webinar   
Nicolas Rabener is the Founder &amp; CEO of FactorResearch. The FactorResearch team provides quantitative solutions for factor investing in equity markets globally.  To watch FactorResearch’s 11 August webinar with the SGX Academy that delved deeper into the performance of classic equity factors in Singapore, such as value, growth, size, momentum, volatility, quality – click here.



Technology a Key Component of Singapore Quality Factor Stocks  

Propnex Ltd

Technology a Key Component of Singapore Quality Factor Stocks