By now, you should already have heard of the news that each Singaporean will receive up to $300 from the government from the one-off BiCentennial Bonus. While most attention goes to the one-off BiCentennial Bonus for Singaporeans, there are much more takeaways form this year’s Budget, especially if you are an investor. Here are four key investment takeaways from this year’s Budget to help you position your portfolio for long term investments.
Investors Takeaway: 4 Investment Takeaways From SG Budget 2019
- More Spending On Healthcare To Tackle Ageing Population
Perhaps, the biggest talking point of this Budget (other than the timing of GST hike) is the increase in healthcare spending. A few initiatives were announced in this year’s Budget to help Singaporeans manage healthcare costs.
The government will be expanding healthcare subsidies under the Community Health Assist Scheme (CHAS) program to help lower to middle income Singaporeans for common illnesses. The government will also put $5.1 billion into a Long-Term Care Support Fund to help Singaporeans with CareShield Life premium subsidies and other forms of long-term care support, such as ElderFund.
Both of these big-ticket items in the Budget, point to a long-term challenge for Singapore as the society continues to age. On top of that, the Merdeka generation seniors will also enjoy additional subsidies for outpatient care for life and additional subsidies at public healthcare providers.
As such, the Street continues to be overweight on the healthcare sector given the tailwind from the secular theme of ageing population. Among the healthcare plays, UOBKH recommends Raffles Medical Group for its good healthcare reputation and track record of effective cost management.
Raffles Medical Group: BUY, TP $1.30; Current share price $1.07
- SME Digitization Getting A Huge Push From The Government
For years, the government has been pushing for SMEs to adopt digital technology to keep up with competition and reduce dependency on human labour. This year’s Budget continues to align with the theme. Besides increasing adoption of digital solutions, the government wants to onboard more SMEs into areas of digital payments and cash management.
RHB believes that this will benefit the banks to lower their cost income ratio and ultimately contribute to higher ROEs. Thus, RHB recommends staying overweight on Singapore banks on their potential for long-term ROE enhancement. DBS Group Holdings and United Oversea Bank are its top two picks for the sector.
DBS: BUY, TP $28.80; Current share price $24.94
UOB: BUY, TP $29.80; Current share price $24.93
- Defence Continues To Be The Top Spending Category
Defence has always been a key area of concern for Singapore. Thus, it is no surprise that defence spending continues to take the top spot in this year’s Budget.
The government will continue to invest a significant amount of resources, about 30 percent of total expenditure to support defence, security and diplomacy efforts. This translates to a five percent growth in defence spending from last year. In particular, the Singapore government will be focused on cybersecurity and digital defence, which is the latest addition to the Total Defence pillars.
According to RHB, this bodes well for ST Engineering, which remains a key innovator and one of the key suppliers of defence equipment to the country.
ST Engineering: BUY, TP $3.97; Current share price $3.76
- Extension Of Tax Concessions For REITs
To help Singapore strengthen its position as a REIT hub, Singapore will continue to allow for tax concessions to REITs. The tax concession was scheduled to lapse in March 2020, but it has now been extended. Under the extension, REITs will continue to enjoy tax exemption on distributions received by individuals, concessionary income tax rates for S-REIT distribution, regardless whether it is received by non-resident or non-individual investors. This will not only lead to greater trading liquidity, it should also lead to increased REIT offerings.
With expectation of moderation in interest rate hikes and favourable demand-supply dynamics, analysts are recommending an overweight recommendation on REITs. RHB recommends Manulife US REIT and Ascendas REIT.
Manulife US REIT: BUY, TP US$0.94; Current share price $0.80
Ascendas REIT: BUY, TP $2.90; Current share price $2.80