Strong interest in new listings on the Singapore Exchange seen last year should carry on in 2018, says the CEO of Singapore-based investment advisory firm SAC Capital. There were 20 IPOs in 2017 – seven on the Mainboard and 13 on the Catalist board – and better retail participation during the year.
“We are optimistic that the positive trend will continue into 2018. In this connection, we will have more research reports and coverage for listed companies, especially those listed on SGX,” said SAC CEO Ong Hwee Li in the firm’s January 2018 newsletter.
Last year, SAC completed three Catalist listings: property developer Pacific Star Development, healthcare group Aoxin Q&M Dental and urban solutions provider Sanli Environmental. Sanli was a strong performer on debut, closing of 66.7% above the IPO price as compared with the average premium performance of 20.5% for all IPOs. SAC’s next IPO involves the spin-off of Lian Beng Group’s property development business.
Looking ahead, Mr Ong noted that the global upswing in economic activity is turning more favourable, with increasingly more robust manufacturing data and consumer confidence in the developed markets as well as those in ASEAN.
Meanwhile, Singapore’s robust growth, which is expected to come in at 1.5-3.5% in 2018 versus advanced estimate of 3.5% in 2017, will be supported by the upswing demand in the global IT cycle, sustained regional trade expansion and domestic-oriented activities such as ongoing infrastructure works and new public residential projects.
“An uplift in consumer sentiment underpinned by the low unemployment rate and wage growth is also expected to support the domestic consumer spending,” said Mr Ong.
In line with the stronger global economy, global equity markets have done well. The Hang Seng Index was the best performer in 2017, chalking a return of 36.0%, followed by the Dow Jones Industrial Average at 25.1%. The Straits Times Index (STI) returned 18.1% last year.
Mr Ong said that the STI in 2018 should be supported by attractive valuations, strong earnings growth, and high dividend yield. In terms of industries, he noted that the Oil & Gas (O&G) sector should see better prospects in 2018 as oil prices have rebounded to 2-year high. “Although the US may potentially open the taps on shale oil production as prices scale higher, we find comfort in OPEC and Russia’s decision to extend production cuts until end-2018,” said Mr Ong.
Improving oil prices will also be a boon for the banks, as it would help lower bad debt provisions and allay concerns on asset quality. Many banks have suffered large O&G-related debt impairment in recent years. This coupled with the rising interest rates, should see the banks perform better in 2018.
Mr Ong said that Singapore’s property market should also see a recovery, with home prices likely to have bottomed in 2017. ” With housing affordability relative to household income improving since 2013, the demand for properties would overrule likely interest rate hikes in 2018,” he said.