• While the STI declined 1.1% in 2Q21, this was the strongest first half of a year for the STI since 2017, with the STI generating an 11.9% total return in 1H21, compared to a 13.8% total return in 1H17. The STI was also among the strongest three APAC benchmarks in 1H21.
   
• STI stocks that were recipient to combined net institutional and net proprietary inflows in both 1Q21 and 2Q21 included DBS, OCBC, UOB, Yangzijiang, SGX and Sembcorp Industries, with 13 of the 30 stocks recipient to combined net institutional and net proprietary outflows in both quarters. 
   
• Bank stocks were among the strongest industries of the global stock market in 1H21 on resilient business investment and the 2/10 US Yield Curve averaging 130bps in 1H21, compared to 60 bps in 2H20. DBS, OCBC and UOB averaged a 19.0% total return in 1H21, in-line with the median return for the 200 largest listed global banks by market value. 

Ebb & Flows in 1H21

While the STI declined 1.1% in 2Q21, this was the strongest first half of a year for the STI since 2017, with the STI generating an 11.9% total return in 1H21, compared to a 13.8% total return in 1H17. The 30 constituents of the STI represent 58% of the S$902 billion combined full market capitalisation of all stocks listed in Singapore.

The last trading session of 2Q21 saw the combined net institutional and net proprietary outflow from STI stocks for the quarter moderate from S$616 million to S$550 million. This was a broad indication that institutions and proprietary participants had taken the last trading session of the quarter to add to their Singapore exposure. Some moderation in flows was also observed at the end of 1Q21, with the last session of 1Q21 seeing the combined net institutional and net proprietary quarterly inflow to STI stocks moderate from S$936 million, to S$880 million.

Bank stocks were among the strongest industries of the global stock market in 1H21 on resilient business investment and the 2/10 US Yield curve averaging 130bps in 1H21 compared to 60 bps in 2H20, supporting banks that generally borrow short and lend long. Together, DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank recipient to net institutional and net proprietary inflows of S$1.39 billion in 1Q21 and S$468 million in 2Q21. The trio averaged a 19.0% total return in 1H21, in-line with the median 19.8% return for the 200 largest listed global banks by market value. Nevertheless a significant rotation was observed with the Singapore bank trio recipient to S$145 million in net institutional and net proprietary outflow between 3 June and 18 June, as the 2/10 US Yield curve flattening by 28 bps on hawkish Fed Reserve comments.

Global progress in getting the better of the endemic, and on a more micro level, significant corporate restructuring, were also key factors for many of the rotations across the other STI constituents.

On the former, in the month of February, together Singapore Airlines and SATS were recipients to S$254 of combined net institutional and net proprietary outflow with the majority of the US, China, Japan & UK seen to overcome COVID-19 resurgences in January. At the time this boded well for the eventual resumption of international travel, and that month, Singapore Airlines share price gained 21%, in line with the 20% gain for world’s biggest airline stocks, while SATS gained 14%.

On the latter driver of rotations, CapitaLand was receipt to S$23 million in combined net institutional and net proprietary inflows, with a 15% price gain in three sessions that followed its 22 March corporate restructure proposal. CapitaLand is restructuring its Group business by consolidating the investment management platforms as well as lodging business into CapitaLand Investment Management, which will create Asia’s largest and the globe’s third largest real estate investment manager.

Meanwhile, resilient global trade and demand for container shipping, saw Yangzijiang Shipbuilding Holdings the strongest of the STI constituents in 1H21 and recipient to combined net institutional and net proprietary inflows in both 1Q21 and 2Q21, with total inflows amounting to 4% of the stock’s current market capitalisation. As reported yesterday, Yangzijiang Shipbuilding Holdings has secured new orders for 100 vessels worth US$5.6 billion representing its largest order wins, based on total contract value, in the Group’s history.

At the same time, the STI’s second strongest constituent in 2020, Keppel DC REIT was the STI’s least strongest constituent in 1H21 with combined net institutional and net proprietary outflows amounting to 4% of the stock’s current market capitalisation. The data centre REIT generated a negative total return of 10% in 1H21, which followed on from its 38% total return in 2020, and the 2019, 66% total return that helped propel the stock into the STI. While the digital economy continues to grow, progress towards social and economic normalisation has put less demands on cloud, digital services and online services.

For the broader STI move, vaccine progress provided support, however COVID-19 infections also continued to grow. While 3 billion COVID-19 vaccine doses were administered globally in 1H21, the total number of cases also grew from 84 million to above 180 million, with the contagious delta variant seeing close to 10 million more cases in 2Q21 than 1Q21. The overarching endemic theme saw the STI consolidate on its 1Q21 total return of 11.8%, adding 0.1% in 2Q21. The relatively more cautious 2Q21 was also observed across the region with the FTSE Asia Pacific Index generating 4.5% total return in 1Q21 and a 2.8% total return in 2Q21.

For the 2H21 ahead, continued vaccine progress and curtailing new cases will remain key drivers for service-orientated stocks that have been adversely impacted by local and global containment measures. At the same time, achieving herd immunities, vaccine equity and the gradual recommencement of international travel and tourism is expected to increasingly rank highly in global policy agendas.

The 30 STI stocks sorted by total returns in 1H21 are tabled below, and details the comparative 1Q21 and 2Q21 net institutional and net proprietary flows.

 Source: SGX, Refinitiv, Bloomberg (Data as of 30 June 2021)