The general consensus in the market is to ‘Sell In May And Go Away’. While DBS does not think that the stock market is going down in 2018 (having just raised its year-end estimate of STI to 3,850), DBS thinks that the near-term performance of the Singapore market might take a slight dip.
With the World Cup coming up in a month’s time, it could be a time for investors to look for a break in the month of May. Historically, the Straits Times Index fell by an average of 8.6 percent during the past six tournaments as trading activity starts to slow in May. Based on past statistics, the best market re-entry time is in the beginning of July, if history repeats.
Investors Takeaway: 3 Stock Strategies To Recalibrate Your Portfolio Ahead Of FIFA World Cup
- Mid-To-Late-Cycle Plays
As Singapore’s recovery progresses deeper into its second year, DBS thinks that mid-to-late-cycle plays will continue to do well. These plays include capital goods, basic materials, commodity-related, consumer services and consumer goods stocks. In April, mid-to-late-cycle plays managed to outperform early-cycle winners such as technology and real estate.
Some of DBS’ mid-to-late-cycle play recommendations include Wilmar (TP $3.65), ThaiBev (TP $1.02), Genting (TP $1.49), Dairy Farm International (TP US$9.77), Singapore Airlines (TP $12.00), Keppel Corporation (TP $10.20), SembCorp Industries (TP $4.40) and SembCorp Marine (TP $2.90).
- S-REITs Going To Continue Underperforming
One of the sectors that DBS recommends offloading is the S-REIT sector. S-REITs have underperformed other sectors year-to-date as the Federal Reserve continues on its rate hike path. DBS notes that S-REITs could continue to underperform the market as the Fed continues to stay hawkish. Among the REIT plays, DBS feels that S-REITs without any growth elements will find it hard to maintain its share price in light of the hawkish Fed stance. In particular, DBS recommends unloading Keppel REIT, Suntec REIT and CapitaLand Commercial Trust, which offer less than 5.5 percent distribution yield.
- Companies In Net Cash Position
In the opposite play to the S-REITs, DBS recommends investing in net cash companies. DBS notes that net cash companies have the financial strength to better weather rising interest rate environment. Using this overarching strategy, DBS screened for stocks with zero debt or net cash as a criterion.
DBS also included a market cap floor of at least $1 billion to search for potential targets to include into investors’ portfolio. Among the stocks that are covered by DBS, UOB (TP $33.20), OCBC (TP $15.30) and Hong Leong Finance (TP $3.20) are the three lenders that fit the bill. Apart from that, DBS also recommends Genting Singapore (TP $1.49), Yangzijiang (TP $1.82), Sheng Siong (TP $1.21), SIA Engineering (TP $3.86) and SingPost (TP $1.61) as its non-financial picks for this strategy.