SINGAPORE (Feb 20): Singapore ended 2017 with a bumper budget surplus of $9.6 billion, the highest in the last 20 years.
The increase was mainly due to exceptional statutory board contribution -- from mainly the Monetary Authority of Singapore -- and boosted by stamp duties from a buoyant property market.
With this, the government will give out SG bonus of between $100-$300 each, costing $700 million. In addition, the much anticipated increase in GST from 7% to 9% has been deferred to 2021 and beyond.
See: Singapore delays highly-anticipated GST hike to 9% to between 2021-2025
See: Singaporeans to receive SG Bonus 'hongbao' as budget surplus soars to $9.6 bil
"This should be positive for consumer spending and sentiment," says DBS analyst Janice Chua in a Tuesday report.
Genting Singapore, which was sold down last week on GST concerns, should see a good rebound, adds the analyst.
Budget 2018 is also expansionary with the setting up of a $5 billion rail infrastructure fund.
See: Singapore to inject initial $5 bil into new rail infrastructure fund
See also: RHB still upbeat on ST Engineering but trims target price by 2.3%
Chua says key beneficiary of rail infrastructure projects is ST Engineering, which is a likely contender for the SG-KL high speed rail project.
Increase in buyers’ stamp duties from 3-4% for residential property purchases could slow en-bloc deals. The impact is small on residential home purchases.
See: Top marginal buyer's stamp duty for residential properties raised to 4%
For a $2 million property, Chua estimates the effective tax rate is expected to increase by only 0.5 basis points to 3.2% from 2.7% and is unlikely to affect the affordability of home buyers.
"However, this could impact en-bloc deals of developers looking to top up their land bank,: says Chua.
Meanwhile, the extension of wage credit scheme benefit companies with large workforce within the lower income group -- consumer services, oil and gas, construction sectors.
See: Singapore Budget 2018: Government to continue supporting firms amid worries on rising business costs
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This could have a positive impact of 1% to 4% on DBS's forecasts for consumer companies -- HRnet, Sheng Siong, Jumbo Group.
DBS is reiterating its positive stance on the market as the Straits Times Index has been resilient and is base building for the next uptrend.
"We continue to like banks, while expecting rotational interest in oil/gas, SMC and consumer sector to be sustained," says Chua.
DBS other stock picks include UOB, OCBC, Keppel Corp, SembCorp Marine, SingPost and Breadtalk.
Shares in Genting Singapore, ST Engineering, HRnet, Sheng Siong, Jumbo Group are trading at $1.29, $3.33, 82 cents, 92 cents and 58 cents respectively.
