SGX stocks lost their ways
Lifetime Membership On 22 February 2024, Dow Jones hit a fresh record of 39,069 points on the back of a stellar earning report by Nvidia. The stupendous form of US stock market has given investors plenty to cheer about amid the uncertain global economic condition. On the other hand, Singapore’s Straits Times Index (STI) has been in awful form for the past one year, falling from 3,282 points on 24 February 2023 to 3,184 points on 23 February 2024. The insipid form of SGX stocks must have left many Singapore investors feeling exasperated.
What is the Singapore stock market current and near-term performance? An SG Wealth Builder Lifetime Member enquired about this interesting question. From the various articles in this blog, followers should probably know by now that I usually do deep dive on SGX stocks. I rarely gave a general overview of the performance of SGX stocks nor make forecast of the stock market performance as I want to avoid making sweeping statements.
Nonetheless, at the request of the SG Wealth Builder Lifetime Member, I shall offer my take on the SGX stock market’s current and foreseeable performance. Just a word of disclaimer: I am vested in some of the SGX stocks covered in this article. As such, my views may be biased towards these counters. Please do your due diligence or engage financial advisors before investing in the stock market. This article is also not meant to induce readers to make any form of investment decisions.
Looking back, I had been blogging about SGX stocks for more than 14 years. During this period, I noticed a worrying trend concerning the waning interests among investors in SGX stocks. Various factors include poor valuations, de-listings at cut-throat exit offers and absurd corporate governance resulting in negative returns for investors.
The past two years were particularly challenging as many SGX stocks effectively turned into zombies – stocks with poor liquidity and low valuations. Perhaps the mighty storm of the China stock market has shaken investors’ confidence in Asia Pacific market. Even blue chips like Singtel and Wilmar have been in terrible forms. Of course, there are winners among SGX stocks, like Sembcorp Industries and Keppel Corp but they are exceptional cases rather than the norm. The following is a sector-by-sector analysis on the current and short-term outlook.
The three local banks in Romance of the Three Kingdoms
DBS, OCBC and UOB are the perennial favorite SGX stocks among Singapore investors. For the past 2 years, the trio has benefitted greatly from the interest rate hikes by US Federal Reserves. The powerful tailwind lifted the net interest incomes of all three banks, leading to their record earnings in the past two years. Investors cheered as share prices of the three banks were in fine form. With market talks of the Fed cutting interest rates in the latter half of the year, many investors may be fearing it’s the beginning of the end for bank stocks. I beg to differ.
Firstly, Singapore Overnight Rate Average (SORA) was implemented only in the latter half of 2021. Unlike SIBOR, SORA is “backward looking”. Henceforth, there will be a “lagging effect” before the negative impact from the interest rate cuts kicks in for the banks. Even if the Fed does cut interest rates this year, I doubt the Fed will slash the rates significantly as they are also keeping a close tab on US inflation rates. As such, I predict that the three bank stocks will remain stagnant in 2024. However, for DBS, there may be a possibility of the management unlocking value of $10 billion through the IPO of Remit. Previously, there was much hype after stunning revelation by the management that the IPO was [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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