DBS Group Research analysts Yeo Kee Yan and Foo Fang Boon have identified ComfortDelGro C52 (CDG), Sats, DFI retail group and AEM Holdings AWX as their top stock picks amid the outcomes of the impending US election, Federal Open Market Committee (FOMC) meeting and China fiscal policy details.
In the ongoing 3QFY2024 results season, the analysts note that CDG and Sats have the ability to “surprise positively”. CDG benefits from stronger recovery and contribution from its UK business while Sats has sustained strength in global air cargo and passenger traffic, they write in their Nov 1 report.
They add that DFI has had an improving outlook following their disposal of Yonghui, with potential signs of bottoming in AEM’s upcoming results.
On the other hand, the analysts note that earnings for Genting Singapore G13 and Frasers Hospitality Trust ACV (FHT) could “surprise on the downside”.
However, they recognise that “a positive end to the year hinges on US election outcome and rates outlook.”
A benign US election outcome and controlled interest rate outlook is likely to lift the Straits Times Index (STI) to the analysts’ year-end target of 3,750 points.
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In contrast, the analysts note that a Republican administration and a more hawkish interest rate outlook might trigger market volatility, with support seen at 3,480 points or even 3,340 points.
To this end, the analysts are of the opinion that a Trump win is “the risk-off outcome for markets” and will prove negative for REITs and stocks with Chinese exposures including Hutchinson Port Holdings Trust (HPH Trust) and Mapletree Logistics Trust M44U (MLT).
REITs could also face volatility amid inflation upside risks, a conflicted Fed and convoluted monetary policy cycles.
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On the other hand, Yeo has identified beneficiaries of a Trump win as Sats and Singapore Technologies Engineering S63 (ST Engineering) given the US reshoring efforts, Singapore Exchange S68 (SGX) and iFast given the increased market volatility and ComfortDelGro and Singapore Airlines C6L (SIA) on capped oil prices.
Furthermore, “resilient domestic exposure should underpin staples Sheng Siong as a defensive play,” Yeo adds.
Conversely, a Harris win is likely to be positive for regional markets in light of a “more stable” global trade and policy continuity environment.
Furthermore, Yeo believes that a Harris administration will benefit REITs such as Frasers Centrepoint Trust J69U (FCT), CapitaLand Ascendas REIT A17U (CLAR) and Mapletree Industrial Trust ME8U (MINT) alongside other rate cut beneficiaries given the more benign inflation outlook.
Yeo notes that a split congress is likely to make it more difficult to the next US president to implement party specific policies.
Regardless of the election outcome, Yeo states that Venture Corp and Frencken are likely to benefit from the technology supply chain diversification into Asean, while Seatrium will be supported by the next president’s focus on either clean energy and, or oil and gas.
The analysts have kept their “buy” calls on CDG, Sats and DFI Retail, with a “hold” call for AEM Holdings with target prices of $1.80, $4.10, $3 and $1.34 respectively.
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They have also kept their “buy” calls on Genting and FHT with target prices of $1.05 and 62 cents respectively.
As at 12.22pm, the STI is trading 2.98 points lower or 0.08% down at 3,569.06 points.
