• In 3Q23, the STI generated a 2.1% total return, marginally outpacing the FTSE ASEAN Extended 60 Index with a 1.1% total return and FTSE APAC Index with a 1.1% decline in total return. During 3Q23, Brent Crude Oil gained 27% to US$95/bbl, while expectations were anchored to the Federal Reserve keeping rates higher for longer in 2024.  This saw both Energy and Bank Sectors lead the global stock market in 3Q23.  
   
• The trio of Rex International, Geo Energy Resources and RH Petrogas averaged 29% in total returns in 3Q23, mostly on the back of the oil price rally in September. Sembcorp and Keppel, which are both pivoting to sustainable solutions, averaged 3.6% declines in total return over the quarter. Including Seatrium and YZJ Shipbuilding, these four STI stocks pursuing greener/cleaner pivots averaged 3% total returns in 3Q23, while the combined average daily turnover soared by 24% from 2Q23.  
   
• The trio of DBS, OCBC and UOB averaged 6.9% total returns in 3Q23, while the combined average daily turnover of the trio decreased by 9% from 2Q23. By the same impetus of high Fed Fund rates for longer in 2024, the iEdge S-REIT Index declined 4.2% in total return in 3Q23, with the combined turnover also declining 9%.
   
• With the embedding of the ‘higher for longer’ rate outlook, 3Q23 saw less variability in forward expectations for FOMCs and the Fed Funds Rate than that of 2Q23. In addition to rates potentially curbing US growth in 2024, the pace(weakness? As pace makes it sound ‘speedy’) of China’s rebound prompted the OECD to reduce its 2024 global growth outlook by 0.2 pp to 2.7%.  
   

In 3Q23, the STI generated a 2.1% total return, bringing its 9-month total return to 3.3%. For the quarter, the STI marginally outpaced the FTSE ASEAN Extended 60 Index and FTSE Asia Pacific Index, which saw total returns of 1.1% and a decline in total return of 1.1%, respectively, in SGD terms. For much of the quarter, the STI consolidated on moves in the preceding quarter with the average daily STI high in 3Q23 at 3,249 just 4 points lower than in 2Q23, and the 3,225 average daily STI low in 3Q23 just 5 points lower than in 2Q23.

Energy and Bank Sectors Led Global stocks in 3Q23

Fueled by the announcement by Saudi Arabia and Russia to extend their voluntary oil production cuts through the end of this year, Brent Crude Oil gained 27% to US$95/bbl in 3Q23 and has since returned to near US$90/bbl ahead of OPEC's Joint Ministerial Monitoring Committee later today. The PTT Exploration & Production (PTTEP) Thailand SDR rallied 12.4% over 3Q23, with dividends boosting the total return to 15.4%. The PTTEP SDR traded an aggregated value of S$9 million in 3Q23 and has an active daily trading range of 1% or 6 ticks. The performances of the three most traded Energy stocks in Singapore are tabled below.

Source: SGX, Refinitv, Bloomberg (Data as of 3 Oct 2023)

Another key macro development was that expectations were anchored to the US Federal Reserve keeping rates higher for longer in 2024. The trio of DBS Group Holdings, Oversea-Chinese Banking Corporation and United Overseas Bank averaged 6.9% total returns in 3Q23. On the other side of the “higher for longer” Fed Funds Rate Outlook, the iEdge S-REIT index declined 4.2% in total return in 3Q23. With the firming of the higher for longer rate outlook, 3Q23 saw less ‘FedSpeak fever’ and less day-to-day swings in the forward expectations of FOMCs and the Federal Funds Rate than seen in 2Q23. The reduction in rate uncertainty, saw both the combined average daily turnover of the three STI banks and iEdge S-REIT Index constituents in 3Q23 decline 9% from 2Q23 levels.  For sophisticated investors looking to assume more risk and potential leveraged returns in the trio of Banks, please see the Daily Leveraged Certificate section on the SGX website. The STI Banks also led the net institutional fund inflow to Singapore stocks in 3Q23, and the 3M compounded SORA remained around 3.7% during the quarter. Much attention in the 3Q23 sector earnings and business updates will be on how the outlook for growth impacts the low-single digit loan growth  earmarked for 2023.

Source: SGX, Refinitv, Bloomberg (Data as of 3 Oct 2023)

In addition to rates potentially curbing US growth in 2024, the pace of China's rebound prompted the OECD in September to reduce its 2024 global growth outlook by 0.2 pp to 2.7%. The 2024 GDP growth estimate for China was reduced from 5.1% to 4.6%.

Manufacturing is highly sensitive to global growth outlooks, with Singapore’s industrial production in contraction since October 2022, in addition to contracting by 6.6% YoY in the first 8-months of 2023. The iEdge SG Adv Manufacturing Index generated a 0.5% decline in total return in 2023, bringing its 9-month decline in total return to 1.8%. Excluding both Yangzijiang Shipbuilding Holdings and Seatrium (which are respectively pursuing more fuel-efficient maritime solutions, and cleaner/ green solutions in the offshore, marine and energy industries) the remaining constituents of the iEdge SG Adv Manufacturing Index saw their combined average daily turnover in 3Q23 decline 7% from 2Q23 levels.

Source: SGX, Refinitv, Bloomberg (Data as of 3 Oct 2023)

As discussed here, paralleling increased focus this year on a lower carbon and more climate-resilient future, multiple Singapore-listed stocks have continued to press ahead with pivots to sustainable energy and fuel-efficient transportation solutions. While the four stocks above averaged saw their combined, relatively muted, total returns of 2.7% in 3Q23, the four stocks saw their combined average daily trading turnover increase by 24% compared to 2Q23.

Local private-sector economists expect the Singapore Economy to pick up pace and grow by 2.5% in 2024, with top downside risks including an external growth slowdown, inflationary pressures in addition to economic developments in China. At the same time, better-than-expected external growth and China’s growth on top of a recovery in the technology business cycle are the firm upside risks.

Source: SGX, Refinitv, Bloomberg (Data as of 3 Oct 2023)

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