Global Markets fell along with STI

Earnings and Annual General Meetings (AGMs) season are in the beginning stages here in Singapore, and asgeopolitical tensions dominating the front and centre for many investors, results and company performances appear to have taken a backseat for now. So far, some of the real estate investment trusts (Reits) such as the likes of SPH Reit, Keppel DC Reit, and Keppel Infrastructure Trust have reported, but results have so far been uninspiring. Investors are still anticipating more upsides from bank and property development counters, and these two sectors could probably inject some investor enthusiasm among the market participants.

S-Reits underwhelm in the face of rising interest rate environment

With the recent minutes from the March US Federal Reserve meeting minutes showing guidance for at least three to four interest rate hikes in 2018, investors are starting to unlock their holdings of S-Reits, and moving into other interest rate sensitive counters like banks.

We shall take a look at the FTSE ST Real Estate Investment Trust (Reit) Index to get a feel of the direction of S-Reits prices.

Source: Phillip Securities POEMS 2.0 Trading Platform (One-year daily chart of the FTSE ST Real Estate Investment Trust (REIT) Index, April 17, 2018)

Looking at the one-year daily chart, we noted that there has been a significant decline in the FTSE ST Reit Index from the peak of 875.21 in early January 2018 to a low of 805.08. Although it has been climbing back up to 822.13 lately, the chart appears to show some sideway movements lately without much directions. We think that the recent release of some of the earnings numbers by some S-Reits, along with the rising interest rate environment could have impacted investors’ appetite for more S-Reit holdings in their investment portfolios.

However, there appears to be some increase in momentum as the 14-day relative strength index (RSI) appeared to have risen a bit to close at 67.78 and inching closer to the ‘Overbought’ region of 70.

We have not written off all the S-Reits completely for this year as not all the S-Reits have reported yet. We are monitoring the earnings releases from some of the S-Reit counters in the office, industrial, logistics, and hospitality sectors in order to gauge how investors’ view their fundamentals along with the operating environments. For the office sector, we noted in a recent Phillip Securities Research report that demand for office spaces in Singapore are likely to start tapering off by end of 2018 following the pick-up in demand as new supply come online.

A slowdown in office supply

Source: Phillip Securities Research (March 26, 2018)

Office rentals starting to pick up due to tapering supply

Source: Phillip Securities Research (April 19, 2018)

For the hospitality sector, we are expecting the growth in tourism numbers, and big-scale events like the recent conclusion of the bi-annual Singapore Airshow 2018 in mid-February, the takeup rates for hotel rooms are expected to pick up, thus translating to improved profitability. Moreover, there has not been much hotel supply injections from new sites

We also recognised that challenges like high labour costs might pose challenges to bottom lines and could narrow the distribution payouts.

As of now, new hotel supply slowed down, and revenue per available user (RevPAU) have stabilised

Source: Phillip Securities Research (April 19, 2018)

Local trade data show slight weakness

The local non-oil domestic exports (NODX) turned down in March at 2.7 per cent yearly due to declines in electronics and non-electronics shipments.  Economists from CGS – CIMB noted in a recent Economics research report that the underwhelming March data might be due to the festive distortions, and could be compensated by an expected growth in April especially with the forward looking Purchasing Managers Index (PMI) showing a pickup.

Last Friday’s (April 13) monetary policy announcement made by the Monetary Authority of Singapore (MAS) indicated that policy makers are not aggressively pushing up the Singapore Dollar too much on the upside in view of the recent US-China trade tensions. Though headline inflation is picking up, the so-called core rate (ex Food and Energy) stays below 2.0 per cent which is the targeted rate for monetary policy setting purposes.

 Local bank stocks are taking a lead so far

Source: Phillip Securities POEMS 2.0 Trading Platform (One-year daily chart of the FTSE ST Financial Index, April 17, 2018)

We noted the sector as a whole has taken quite big leap in its trajectory with the index as of April 17 showing a rise to 1,057.47, and is within the target for the all-time high of 1,076.55. For example, DBS hit is lows two weeks ago to around S$26.90 before resuming its upward trajectory to close Thursday (April 19) trading session at S$29.91 per share, up 55 cents or 1.873 per cent intraday.

Source: Phillip Securities POEMS 2.0 Trading Platform (One-year daily chart of DBS share price, April 19, 2018)

The index is enjoying a nice climb to the latest levels with the 14-day RSI close to the ‘Overbought’ levels of 70. We think that the recent rate hikes, along with the robust earnings results from US banks recently, there is somewhat a stock price support for the local bank counters.

Venture stock took a big dive

Source: Phillip Securities POEMS 2.0 Trading Platform (One-year daily chart of Venture Corporation stock price, April 21, 2018)

In an unexpected turn of events, the stock price of one of the leading technology stocks on the SGX, Venture Corporation Ltd fell 12.248 per cent or S$3.53 to end Friday’s session at S$25.29 per share. The stock movements triggered a trading query raised by SGX late morning. However, the company responded after the market close noting that it was not aware of any material information apart from its full-year results which was published in late February. The company noted that it is scheduled to publish its upcoming for first quarter 2018 results on April 25, 2018.

In a Business Times article published on April 21, 2018, it noted that one of its customers, Phillip Morris (PM) saw its stock price nosedived as it disclosed that the sales of its “heat not burn” smokeless tobacco products were not growing as fast as expected.  Venture is widely believed to make the so-called “IQOS” or “I Quit Ordinary Smoking” devices designed to release a nicotine-containing vapour. In the same article, it quoted a MayBank Kim Eng research report which was published on Friday noting that the IQOS project probably accounts for only 3 – 4 per cent of Venture’s revenue. It contrasted from an earlier Credit Suisse report which estimated that the IQOS project contributed about 11 per cent of Venture’s revenue in 2017 and will account for 14 per cent of revenue in 2018.

Looking at the one-year daily chart above, the stock has dropped below the 50-day moving average (MA) line, and the 14-day RSI is close to ‘Oversold’ levels of around 30. We think that there are other parts of the business like the manufacturing of human genome machines that some might not have taken into account. The company is diversifying to other areas as well.

How did STI ended Friday’s session

Source: Phillip Securities POEMS 2.0 Trading Platform (One-year daily chart of Straits Times Index (STI), April 21, 2018)

The Straits Times Index (STI) has attempted to reach the all-time high on April 19 at 3,604.06, but it soon fell back to end Friday’s session 3,573.38, or 25.35 points down. On a weekly basis, the index was up 2 percent. For the year, the STI is up 5.01 percent.

Looking at the one-year daily chart, we noted that the index has broke the Fibonacci resistance line of 3,503.44 on the 78-percentile level. We believe that the index is trying to break the all-time high of 3,611.69. We shall monitor its trajectory in the next few weeks.

Meanwhile, the overall market trading volume on Friday was 1.481 billion worth S$1.406 billion. It is slightly less than the 1.58 billion shares worth S$1.375 billion traded on Thursday.

Tech sector rout

Source: (One-year daily chart of the Nasdaq Composite Index, April 21, 2018)

During the week, major Dow component stock counter, IBM released its 1Q2018 results showing narrower profit margins and no revenue growth. The growth of its cloud business which has often been one of the major support, was 14 per cent in the first quarter. This was sharply lower than the 2017 average of 24 per cent, according to Bloomberg Intelligence.

Following that, another bad news from Apple Inc. (AAPL)f where two sell-side analysts published their research reports noting that earnings for the upcoming second-quarter release scheduled in early May is likely to disappoint. The analyst from Morgan Stanley lowered the 12-month price target of Apple to US$200 from US$203, citing expectations on a set of in-line results, and her channel checks showed that there could be iPhone build cuts and weak China data.

Another analyst from Canaccord Genuity noted in the his firm’s latest consumer survey “indicates slow iPhone sales ahead of new product launches”. He went to note that the US$1,000-plus price point for iPhone X “has been a greater deterrent for broad market appeal than anticipated” while the phone’s screen size isn’t large enough to have a wide appeal in the Chinese market.

Apart from IBM and Apple, more bad news that appeared to have pin down the final nail to the coffin. This time, it was the stock price of Asian technology giant, Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) which fell 5.7 per cent to close at US$39.53 on April 19. TSMC revised its full-year revenue target to the low-end of its earlier forecast. The company now expects full-year 2018 total revenue to grow 10 per cent, compared to its prior forecast of 10 to 15 per cent growth.

TSMC also went on to note that the global semiconductor industry to grow 5 per cent in 2018, down from its earlier forecast of 5 per cent to 7 per cent. It also sees revenue at contract chipmakers rising 8 per cent, rather than the 9 per cent to 10 per cent previously forecasted.

As Apple is one of the major customer of TSMC, the latest downgrade of its earnings appeared to take a toll across the entire industry. As shown in the one-year daily chart shown above, the Nasdaq Composite Index has started to tumble from a resistance level of about 7,300 points to close Friday’s trading session at 7,146.13. This is slightly below the 50-day MA level of 7,203.51.

Have we seen the end of Tech stock frenzy

We do not see a dead end to the growth of technology stocks as a whole. We think that the sector, after having thrived by the rapid growth in the development and usage of technologies, is probably taking a breather. We think that there are other areas of growth like blockchain, artificial intelligence (AI), and driverless vehicles that have yet fully maximised. Not withstanding what we saw in the latest data breaches at Facebook Inc. (FB), we think this presents a case for cybersecurity or data security firms to step up to the table and develop solutions to minimise the future occurrence of data breaches.

One data security firm one might think of is Symantec Inc. which develops cybersecurity systems, has seen some revival in its stock price as shown below:

Source: (One-year daily chart of Symantec Inc. (SYMC), April 21, 2018)

We noted that the stock has climbed above the 50-day MA and its 14-day RSI is also taking a similar upward trajectory. The stock has also displayed a reverse ‘head and shoulders’ pattern (inverse W-shape pattern) at the low-end of below US$25.50 and has climbed to close Friday’s trading session at US$27.71 per share.

Though there appears to be ‘dead cross’ or the 50-day MA crossing below the 200-day MA, we think that there could be a possible revival of fortunes of the stock counter. However, stopped short of any specific stock recommendation, SYMC appeared to be showing some progress in the pace of growth.

A summary of analysts’ expectations on SYMC

Source:, Factset (April 20, 2018)

Although there is an overwhelming majority of ‘Hold’ ratings, there are still 9 ‘Buy’ ratings. It is not as negative as previously. The company is expected to report its March quarter earnings update on May 08.

How did the US markets on the whole perform during the week

Friday’s US trading session was centred on Apple and General Electric earnings outlooks. The former saw its stock price falling significantly as analysts including one from Morgan Stanley took down earnings estimates for the counter citing slower iPhone builds. For the latter, General Electric (GE) reported a surprising set of quarterly results which showed a 4 per cent gain in its stock price after a stronger quarterly top and bottom-lines that beat analysts’ expectations. Moreover, GE’s management reaffirmed its outlook for 2018.

Source: (One-year daily chart of General Electric (GE), April 24, 2018)

We noted that there was a sharp surge (shown by the black candle on the right-hand side of the chart) in the stock price to US$14.54 after having been sold down for the past one year.

Big caps dropped back below the 50-day moving average

Source: (One-year daily chart of S&P 500 index (SPX), April 20, 2018)

Looking at the one-year chart depicting the S&P 500 index, we noted that the index managed to climb above its lows of below 2,605, only to be stopped short as it tries to break the 2,700 point-mark. At the last traded level of 2,670.14, we think that there could be more volatilities that might hamper the continued climb. We also note that the 14-day RSI is still showing an unchanged level of close to 49 to 50. This could indicate that investors are not entirely negative on the index and its components. We think that they could be waiting at the sidelines to gauge the market trends.

Summary of US market closing indices

Source: (April 20, 2018)

Overall, the US markets, in terms of valuations, has been driven high to above 20 times. The recent declines seen, along with geopolitical concerns, trade wars, rising interest rates, and increase in market volatilities might have caused investors to take a pause and evaluate. Although the banking sector recently enjoyed nice stock price gains due in part to the rise in interest margins, the fee-based services, and investment banking operations could face short-term challenges like postponement of Initial Public Offerings (IPOs) due to the market volatilities. However, the rise in market volatilities might also help these financial institutions as areas like derivatives, and foreign currencies could benefit from the rise in market volatilities.

Therefore, worries aside, despite the challenges, the US markets will continue to rise, albeit a slower pace, and unlikely to match 2017’s overall performance. We shall monitor it carefully going forward.

How did out model investment portfolio perform

Note: Model equity portfolio performance as of April 20, 2018. For illustration purposes only, and information is not verified by third party. Past performance is not necessarily indicative of future performance. Please seek the advice of your qualified licensed financial adviser before any investments are undertaken.

Since the inception of the model equity portfolio at the end of November 2016, the latest portfolio returns this week have shown a major outperformance of 85.86 per cent, inclusive of capital returns, dividends earned, and realised returns earned during the last rebalancing round on December 31, 2017. This compares to the total return of 23.00 per cent for the Straits Times Index (STI) during the same time period.

The top three holdings in total return terms (dividends plus capital gains) include Nordic (up 44.7 per cent since end June 2017); followed by Ascendas Reit (up 15.3 per cent since November 2016), and SATS Ltd (up 12.1 per cent since December 2016).

The model equity portfolio did experience a shortfall coming from Singtel (down 9.8 per cent since December 2016); followed by Straits Trading (down 10.2 per cent since end June 2017).

For now, we are not planning to make any changes or do any rebalancing for the portfolio. We shall actively monitor the model portfolio till end of June 2018.

Upcoming Earnings News next week

Source: The Edge Magazine Singapore (Issue #827)

Economic data releases next week



Next week, we are expected a get a plethora of some important economic data that are closely monitored by economists, including core inflation rate, industrial production, the final estimates of the URA and HDB property price statistics, and unemployment rate.



United States

Next week, some of the closely watched US economic data include new and existing home sales for the month of March, durable goods orders data for March, and the second estimate of first quarter Gross Domestic Product (GDP).

The state of oil prices will also be closely monitored as Saudi Arabia has stated they hope to see oil prices to rise to US$100 per barrel. This, along with the geopolitical tensions, might just provide the kicker to overall rise in oil prices.

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About Peak Hour 87 Articles
I am in my mid-to-late 40s, married, and am thankful for my wife for all the things she has done. We do not plan to have kids, but are blessed with the simple lifestyle that we truly cherished with each other. I used to be from the financial services industry, having spent 12 years of financial industry experience, including three years working as a research associate for a hedge fund company in Wall Street, US, with assets under management (AUM) close to US$400 million during its peak in 2008. I am currently working as a market analyst with a Singapore-based agrochemicals company. I have a deep interest in equities trading/research and analysis, data analytics, real estate, REITs, forex, and digital currencies. I don't consider myself as an avid writer, but I hope to learn as much possible. I am a Chartered Alternative Investment Analyst (CAIA) holder and passed his Level I Chartered Financial Analyst examinations. I hope to complete my CFA examinations within the next five years. I value all the feedback provided by fellow readers and bloggers. Please provide any feedback on the work I did. Thank you readers.