#whatstrending feat. CGS-CIMB Securities

Ever wondered what is currently driving the local and regional markets? #whatstrending is a series addressing some of the most trending questions/topics on the markets for investors. Designed to be educational, expect to get factual information on what is driving sectors and stocks listed on SGX, featuring insights from professionals in the community.

Today, we hear more from CGS-CIMB Securities’ Ernest Lim, Remisier, Private Wealth, as he shares his thoughts and views on what lies ahead in 2024. Ernest Lim (林椲倢) is an avid investor, trader cum remisier, a CFA charterholder, and a Chartered Accountant of Singapore. He regularly publishes articles on his blog covering a wide range of topics on finance and investment.

Q:  How is the economic environment as we step into 2024?

From Ernest Lim, Remisier, Private Wealth at CGS-CIMB Securities:

Since my previous #whatstrending article on 3 November 2023, S&P500 has clocked its ninth consecutive week of gains. This is the longest period of consecutive gains since 23 January 2004, based on data compiled by Dow Jones Market Data.

For our Singapore market, the Ministry of Trade and Industry (MTI) on 22 November 2023 announced that Singapore’s economy is estimated to grow between 1% and 3% in 2024. This seems to be an improvement from 2023's estimated GDP growth of around 1%.

Singapore’s non-oil domestic exports (NODX) rose by 1% YoY in November, a first rise after 13 straight months of decline. This is attributed in part to favourable base effects. Although this is encouraging, it is too early to determine whether this marks a new trend as more data is required.

Q:  Which sectors are you keeping an eye out for in 2024?

From Ernest Lim, Remisier, Private Wealth at CGS-CIMB Securities:

Since August, I have been busy meeting REIT managers as I feel that we are nearing the peak of the interest rate cycle. REITs have had a good run since October and some may be due for a pullback after their rebound in share prices. Readers can consider using the pull back to accumulate selective REITs with a medium-term horizon as there may still be pockets of opportunities in 2024. Examples are hospitality REITs (due to the strong pipeline of MICE events and concerts); China related domestic consumption REITs and perhaps even domestic infrastructure-related trusts such as NetLink NBN Trust.

In addition, notwithstanding the pessimism surrounding China, I believe there are opportunities in the Chinese companies listed on Hong Kong bourse. Based on Bloomberg, Hong Kong closed 2023 as the world’s worst performing stock market, notching a record fourth consecutive year of losses. Hang Seng’s valuations appear attractive, at 8.4x FY24F PE and 0.95x FY24F P/BV. It trades at almost two standard deviations below its average 5-year P/BV of 1.1x.

Readers can gain exposure locally via the Lion-OCBC Securities Hang Seng TECH ETF and Hang Seng Index DLCs (just to cite a couple of examples). Naturally, there are risks involved and readers should assess them carefully. Lion-OCBC Securities Hang Seng TECH ETF (HST) may be an interesting proxy for readers if they wish to have exposure to China technology stocks listed on Hong Kong bourse.

Based on the above chart, Lion-OCBC Securities Hang Seng TECH ETF seems to be testing its crucial support $0.582-0.602. It closed at $0.603 on 3 January 2024, which is the lowest close since 28 November 2022, excluding the market sell-off from 22 to 27 December where China tech stocks slumped due to the draft game regulations published.
 

Q:  What are key developments that investors of the Singapore market need to look out for?

From Ernest Lim, Remisier, Private Wealth at CGS-CIMB Securities:

In the Fed's latest policy meeting, there have been significant changes in the Fed Chair's tone. During his Q&A session, their updated economic projections and dot plot collectively signified a meaningful shift, which markets latched on, causing a rally from stocks, bonds, crypto-currencies etc. This is also partly why I believe that the rally in our REITs sector may have legs. However, for those REITs which have rebounded significantly (i.e. >30% from their recent lows), a better entry may be to wait for pullbacks.

Some macro key developments that bears are watching:

• Recovery in China – its property sector, stock market, consumer sentiment, and hopefully favourable government policies etc. The performance of China and HK markets do have some influence on the SG market.
• Geopolitical tensions – Examples are US vs China, China vs Taiwan, or Middle East tensions etc., if worsen, may have some negative impacts on our market.
• US Interest rates; inflation and the US economy – Market will focus on whether Fed can engineer a soft landing.
• Elections around the world – Taiwan General Election on 13 January 2024, along with US Presidential election and Singapore General Election, happening perhaps in late 2024.

For more insights from Ernest, visit his blog at ernest15percent.com.

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