Real Estate Stocks Unlikely To Benefit From New Budget
SINGAPORE – Stocks of major established companies in the city-state, particularly real estate companies, and financial firms, are unlikely to benefit from the new annual budget to be announced on Tuesday (16 February), reported Bloomberg on Saturday (13 February).
“The upcoming budget is unlikely to be a game-changer,” said DBS Group Holdings’s Analyst, Kee Yan Yeo.
In particular, lessors of commercial properties like CapitaLand, City Developments Limited (CDL), and Mapletree Commercial Trust no longer benefit from loan covenant waivers and other forms of government assistance in exchange for providing relief to their tenants.
Notably, commercial property landlords remain under pressure as working from home remains the default arrangement as labour groups and the Ministry of Manpower (MOM) deferred the easing of workplace restriction after Phase III of re-opening on 28 December 2020. Another negative factor is the absence of tourists as borders remain closed to most countries.
OCBC’s Head of Investment Research Carmen Lee also believes that companies that are flourishing during the COVID-19 pandemic like data centres, as well as financial firms with easy access to funding are unlikely to get major incentives in the new annual budget.
Market watchers think the budget, with a goal to reverse Singapore’s worst economic contraction since its independence in 1965, will prioritise the pandemic-hit travel and tourism industry, as well as companies with mandates in line with the government’s digital and green initiatives.
For instance, the aviation industry will likely receive more government assistance via wage subsidies and cost-relief measures, shared Phillip Securities, DBS, and Maybank Kim Eng Securities. At present, this sector is languishing as only tourists from a few nations like Taiwan, Australia, and mainland China are allowed to enter Singapore.
DBS’ Yeo also believes that the Jobs Support Scheme will likely be sustained. The continuation of the scheme – which provides wage support to employers to assist them in retaining their local staff – means that firms like Singapore Airlines, aircraft-equipment maker SIA Engineering, and airline caterer SATS could benefit.
“Certain sectors are still struggling with weak demand, high operating costs, and manpower constraints and may require continued policy assistance. Some of these support measures are gradually reaching the end of their shelf life, but a premature full-scale withdrawal is also unlikely in order to forestall a cliff effect,” OCBC’s Head of Treasury Research & Strategy Selena Ling said in a report dated 5 February.
However, the absence of support for banks and commercial property players could be bad news for the benchmark Straits Times Index as both sectors account for a large chunk of the index, which have edged up by 3.5 percent so far in 2021.