Here are the Winners and Losers From Singapore’s Targeted Budget
(Bloomberg) -- Singapore’s budget targeting just a few sectors of the country’s pandemic-hit economy for support will do little to significantly boost the country’s lagging stock market -- although some sectors like aviation and green energy are set to benefit, say analysts.
The benchmark Straits Times Index, among Asia’s worst performing gauges last year, dropped as much as 0.9% on Wednesday after closing near the day’s low in the previous session. Analysts see aviation stocks as key winners, and property stocks, a key component of the benchmark, as losers.
Finance Minister Heng Swee Keat announced plans Tuesday for the government to spend an additional S$11 billion ($8.3 billion), as part of the S$107 billion total budget outlay, to help households and businesses hurt by the Covid-19 pandemic, as the Southeast Asian country grapples with its worst economic contraction since it became independent in 1965.
“The budget is pretty targeted toward some sectors so those (targeted) themes will move rather than the index,” said Shekhar Jaiswal, head of research at RHB Singapore. “Last year was blanket help -- this year is more about those who are still hit.”
CGS-CIMB analyst Siew Khee Lim called the budget a “non-event”, providing incremental relief for just a few sectors. That means “corporates need to buck up on growth and cost controls,” she wrote in a note on Tuesday. Siew maintained her 2021 target for Singapore’s equity benchmark unchanged at 3,068, implying an about 5.3% gain from current levels.
Here are the sectors analysts say will be the key winners from Singapore’s budget plan:
Heng proposed S$870 million in support for the aviation sector, as well as extending an ongoing job-support plan instituted last year. Singapore Airlines Ltd. dropped as much as 1.1% after rising 1.4% on budget day while airline caterer SATS Ltd. fell as much as 1.2% after rising by almost similar magnitude in the previous session.
“While the support for the aviation sector was expected, the fact that related stocks didn’t fall shows the market appreciated the budgetary allocation,” said Joel Ng, an analyst at KGI Securities (Singapore) Pte.
Green Businesses, EVs
Singapore plans to issue green bonds to raise funds for selective public infrastructure projects, and has identified as much as S$19 billion of public sector green projects as a start. It will also set aside S$30 million over the next five years for electric-vehicle-related initiatives and revise fees to encourage the early adoption of EVs.
The focus on electric vehicles will be positive for taxi-operator ComfortDelGro Corp., according to Terence Chua, analyst at Phillip Securities Research Pte. “ComfortDelGro will win because of an improving economy and their taxis, which are already transitioning toward electric vehicles. Most are already hybrid,” he said.
ComfortDelGro’s shares rose as much as 1.9% on Wednesday after falling 0.6% in the previous session.
Singapore is considering plans to issue new bonds to finance infrastructure projects worth as much as S$90 billion, Heng, who’s also the deputy prime minister, said in his budget speech.
Phillip Securities’ Chua said Keppel Corp., Sembcorp Industries Ltd. and Keppel Infrastructure Trust are the stocks to watch on this spending plan.
Singapore’s real estate-related stocks gave up their intraday gains on Tuesday and closed lower after Heng didn’t, as expected by some market participants, propose aid for the sector.
The FTSE Straits Times Real Estate Investment Trust Index and the FTSE Straits Times Real Estate Index each were trading little changed on Wednesday.
Heng’s proposal to increase the nation’s goods and services tax rate “sometime” between 2022 and 2025 is being seen as a mixed bag for the consumption-related stocks. While a higher tax rate will weigh on consumers’ pockets, its deployment on so-far cheaper online purchases will be positive for bricks and mortar retailers.
“This new tax for online purchases is better than the current situation, where they are not taxed at all,” said Phillip Securities’ Chua.
Stocks to watch for regarding the coming tax hike include CapitaLand Integrated Commercial Trust, Mapletree Commercial Trust, Frasers Centrepoint Trust, Jumbo Group Ltd., Fraser and Neave Ltd. and Sheng Siong Group Ltd.
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