FSMOne SG - Research Highlights

2021-07-29 13:19:11 Macro Research

2Q 2021 Market Report Card – Top Performing Equity Markets

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• Global equity markets continued advancing to record highs in 2Q21, gaining +8%. Our top three performers in the second quarter were Brazil (+23.6%), Russia (+14.5%), and Taiwan (+11.0%).

• Taiwan - While we are unlikely to see Taiwan equities replicate the stellar performance seen in ’20 (over +30%) and 1H21 (over +24%), we remain bullish on a strategic basis and expect decent upside potential given very favourable structural tailwinds and limited downside risks.

• Russia - We believe the potential upside - both price and dividend - provides a good compensation for the current mild political risk climate. Having said that, rising energy prices have driven much equity upside in 1H21 (over +24%). We have dialled back some optimism but remain broadly positive moving ahead.

• Brazil - We see Brazilian equities as a high-risk high-reward play that is skewed positively - towards the ‘reward’ side - due to positive market and idiosyncratic factors. Equity outlook remains constructive, especially amongst the EMs, with one of the largest upside potential.

: Read the full article here Open / Comment

2021-07-28 13:56:04 Quick Take

What you need to know about China’s edtech crackdown and its impact on the tech sector

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• Considering the sweeping reforms announced by the regulators for China’s edtech sector, any meaningful recovery in the share prices of edtech companies is unlikely to materialise.

• The sell-off likely to be sentiment-driven, as the new measures should have minimal direct impact on the broader tech sector.

• The long-term growth story of the sector remains, but expect higher volatility in the near-term due to the regulatory overhang.

: Read the full article here Open / Comment

2021-07-27 12:24:39 Stock Idea

After a record quarter, this healthcare stock still offers an upside potential of close to 40%

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• The share price of Singapore Medical Group fell after discussions with a third party regarding a possible share transaction fell through.

• Nonetheless, the company continued to deliver a great financial performance, chalking up a record quarter due to strong demand from its Diagnostics & Aesthetics segment.

• The long-term growth story of the private specialist healthcare sector remains intact. Structural trends such as rising income level, an ageing population, and the advancement in technology will drive the growth of SMG.

• With a net cash position of SGD 8.2 million, SMG is poised to deliver inorganic growth in the long term. We believe that target acquisition markets are likely to be in the Southeast Asian region.

• We have upgraded our target price to SGD 0.43, derived from a fair PE multiple of 14X applied to our estimated FY2023 earnings per share. This represents an upside potential of a decent 37%.

: Read the full article here
: Singapore Medical Group (SGX:5OT) Open / Comment

2021-07-27 03:30:19 In this week’s Bond Market Monitor, the ECB and central banks of China and Indonesia are keeping their interest rates unchanged.

Plus, updates on Hyflux’s liquidation and China Evergrande’s debt dispute. https://bit.ly/3i4PF53 Open / Comment

2021-07-26 13:51:40 ETF Idea

Cyberattacks have become increasingly common, making cybersecurity more important than ever.

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• As the world continues to undergo massive digital transformation, cybersecurity has become more important than ever.

• While technology has brought many benefits to the various companies, the digitalisaton of data has also made them vulnerable to cyberattacks.

• Remote working is here to stay but this also made companies more vulnerable to cyberattacks.

• Cyberattacks have increased in both numbers and severity, prompting authorities to impose new and tighter cybersecurity laws on organisations to protect and secure systems, data, or any entry points that may be susceptible to cyberattacks.

• In light of these trends, we believe that there is an incentive for greater investments in cybersecurity, where cybersecurity spending across various sectors will increase even further.

• Valuations may be stretched in the near term, but there is still a long runway of growth for this industry in the coming years. Investors may consider using a regular savings program before switching to a lump sum investment should the opportunity arises.

: Read the full article here
: Global X Cybersecurity ETF (NASDAQ:BUG). Open / Comment

2021-07-23 16:06:47 Stock Idea

Meituan: More room for share price to climb driven by investments in new initiatives

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• Benefitting from the strong demand for its services during the pandemic, Meituan’s revenue surged by more than 120% in 1Q21.

• Meituan has signalled that it intends to capitalise on the immense growth potential of China’s community e-commerce market by ramping up its investments in Meituan Select. 

• Rising internet penetration rates and disposable incomes in the rural regions are expected to power the future growth of China’s community e-commerce market. 

• Our estimated target price for Meituan is HKD 414, which represents a potential upside of 50%.

: Read the full article here
: Meituan (HKEX:3690) Open / Comment

2021-07-21 13:53:41 In this week’s Bond Market Monitor, the central banks of Canada, New Zealand and Japan announced their updates to their monetary policies – most interest rates have been left unchanged.

Plus, Lippo Malls Indonesia Retail Trust’s rating downgrade, Huarong’s repayment of its long term debt and China Evergrande’s special dividend plan. https://bit.ly/3kLkca7 Open / Comment

2021-07-19 13:39:34 Will interest rates stay low for long? Maybe not. Investors might want to start preparing for the higher interest rates ahead.

Here’s what will happen to SGD bonds and perps, and what you can do to mitigate the impact of rising rates. bit.ly/2USAXoQ Open / Comment

2021-07-16 13:28:11 Fund Idea

5 Funds investors should look at for the second half of the year

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• Strong economic data and initial inflation prints have sounded a loud and persistent warning bell, and we believe the current low-interest rate environment is unsustainable and unlikely to persist for much longer.

• This makes it paramount that investors start positioning their portfolios accordingly.

• For the second half of the year, we continue to favour equity, and advocate for a quality and fundamental focus as these companies are likely to benefit from the higher inflation/interest rate environment and underlying.

• With these factors in mind, here are our top 5 fund picks for the second half of 2021.

: Read the full article here Open / Comment

2021-07-15 14:01:24 Macro Research

The inevitable reversal in interest rate cycle in the next 2 years

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• We expect two inflation scenarios moving forward and caution investors against both scenarios given the consequent implications on asset classes.

Central case: core PCE will likely settle between 2 - 3% over the next two years.
Hawkish case: core PCE to remain above 3% over the next two years, reflecting our view of a high level of persistent inflation.

• Both our central and hawkish case points to a reversal in the interest rate cycle in late 2022.

• With the higher inflation backdrop presented in both cases, we believe inflation risk is currently underpriced.

• For our central case – we expect equities to be able to digest a 10-year yield of below 2.7%. This implies that equities should be relatively more attractive than bonds. 

• For our hawkish case, we expect equities to struggle if the 10-year yield climbs to 3-4% within the next two years, implying that bonds should be relatively more attractive than equities.

: Read the full article here Open / Comment