Seems CIMB thinks that the “old” policies on HDB flats, FTs and tpt (that cost the PAP votes because the policies made voters suffer) are better for listcos than any changes.
In our post-elections note, we highlighted that a raised HDB income eligibility cap and slower immigration and slower population growth will be detrimental for property stocks. We reiterate our negative view on property. The upcoming hike in the HDB eligibility ceiling will move the sandwich class from over-priced mass-market private properties back to HDB flats. We think that that will be bad for developers with large mass-market exposure (Allgreen Properties, City Developments).
A marked slowdown in foreign immigration will reduce rental demand, more telling when new completed supply comes onstream in 2013. Capped foreign immigration would have negative implications for some industries that depend on foreign workers, namely, construction and shipyards. Lastly, the need to keep public-transport fares low suggests that ComfortDelGro Corp and SMRT Corp may not be able to get the fare hikes that they have applied for this year. Overall, a changed government trying to portray receptivity to the people is unfortunately, bad for corporate profitability.
We downgraded the Singapore market from ‘overweight’ to ‘neutral’ on May 18 on three points: 1) a worsening outlook for corporate profitability; 2) signs of some stalling in US GDP growth and a revival of old EU debt concerns; and 3) new policies after the Singapore General Election which could be further drags on corporate profitability. We retain this view and our bottom-up target of 3,560 for the Straits Times Index.
Our top picks are still DBS Group, Fraser and Neave, Noble Group, Singapore Airlines, Overseas Union Enterprise, Sembcorp Industries and Wilmar International. Our ‘ideas’ are still CWT Limited, Ezion Holdings, Frasers Commercial Trust, Midas Holdings, STX OSV Holdings, OKP Holdings, UMS Holdings and Foreland Fabrictech Holdings.
Singapore Market – NEUTRAL