In close to three decades since the introduction of Volatility Index (VIX), the “fear index” has never been as low as 2017, having hit an all-time low of 9.14 in November 2017. As we entered 2018, VIX slowly crept up and shot to 37.2 at the start of February. While VIX is now lower at 19.6, it is still above levels seen in 2017. While the VIX has historically been an early warning signal for a market crash, UOBKH believes it is different this time around.
UOBKH notes that the current volatility is not as severe as compared to 2015. The recent market pullback of around 11 percent from its peak, however, mirrors the same magnitude of the plunge in 2015. But since then, the market is slowly recovering back to its all-time high in January.
UOBKH: Investors Should Look Beyond Short-Term Noise
If investors look beyond the near-term noise and volatility, UOBKH suggests that the volatility in the market is an opportunity to buy on weakness. This is because UOBKH is still positive on the Singapore market, given the pick-up in earnings growth that could make companies’ valuation even more inexpensive.
Investors Takeaway: Strategies To Buy On Market Fear
Stocks With Resilient Buying Support
One of UOBKH’s strategies to buy on market fear is to target companies that have resilient buying support even on overall market weakness. These are stocks that bucked the overall downtrend to finish the trading day neutral or slightly up against the STI’s sold down. UOBKH’s top three stock picks in this category are Venture Corporation, SATS and City Development Hospitality Trust. UOBKH believes that any ensuing market sell-off is an additional opportunity to accumulate on weakness.
UOBKH’s Bargain List
Apart from stocks with resilient buying support, UOBKH also highlights stocks that have retraced significantly from its 52-week highs. At the time of writing, these stocks include Indofood Agri Resources (39.7 percent below 52-week high), ComfortDelGro Corporation (28.2 percent), Raffles Medical Group (27.3 percent), Wilmar International (23.5 percent) and SIA Engineering (19.6 percent).
Selective Opportunities In S-REITs
With the anticipated interest rate hike due to inflationary pressures, the S-REITs have been retracing from their year-to-date highs. While some profit taking is in play, UOBKH believes that the market has been overselling some of the quality S-REITs. Within the S-REIT segments, hospitality, office, industrial and retail REITs are among UOBKH’s top recommendation. UOBKH has singled out City Development Hospitality Trust, CapitaCom Trust and Ascendas REIT as its key picks in the S-REIT universe for buying on weakness.
4 Sub-Strategies To Look Beyond The Noise
UOBKH also recommends four sub-strategies to help investors look beyond the noise generated by the market.
- Multi-year growth drivers – Venture Corporation, Cityneon Holdings, Raffles Medical Group and Citic Envirotech
- Reflation picks – City Developments, Keppel Corp, Wing Tai Holdings
- Quality laggards – Singapore Post, Raffles Medical Group, ComfortDelGro Corporation
- Stocks with earnings upside or specific catalysts – Venture Corporation, SATS