DBS has tipped five Singapore Straits Times Index stocks to accumulate in June on expectations that the broader market will have a quiet month after May’s drop.
“While the World Cup and June school holidays are likely to divert attention from the stock market, the good news is that post May’s tumble, downside for the STI should be rather limited,” it said in a note on Monday. The market is now trading at an “attractive” near 12.76 times 12-month forward price-to-earnings, it said.
It tipped support at around 3415 or slightly lower. The index ended Monday up 1.17 percent at 3467.48. But it fell 4.7 percent for the month of May.
DBS tipped five STI components to play for a quiet June.
It tipped stocks that it expected would remain up when the rest were mostly down, with criteria of positive month-on-month performance in May, more than 10 percent upside to their target price and Buy calls. The three stocks that fit the bill were Wilmar, Singapore Airlines and Genting Singapore, which were all in its Singapore model portfolio, it said.
At the other end of the spectrum, DBS tipped stocks for bargain hunting opportunities, targeting shares with a reasonable assumption that selling pressure has eased and value has emerged. The two stocks that met those criteria were Yangzijiang and HPH Trust, it said.
Yanzijiang’s recent selldown was on overblown forex and steel-price concerns, and it now trades at a “rock-bottom valuation,” DBS said. It added that HPH Trust was sold down on its removal from the MSCI Singapore index and the “one-off massive selling exhaustion” has passed. It noted that HPH Trust now trades at a 2018 dividend yield of 9.6 percent.
Additionally, DBS noted that with U.S. 10-year Treasury yields coming off May highs amid political uncertainty, yield stocks could find support if bond yields turn sideways. Bond prices and yields move inversely; the prospect of higher yields from relatively safe government bonds has tempered investor appetite from riskier equity yield plays.
DBS said it screened for yield stocks with net cash or zero debt, a 2018 yield above 4 percent, a Buy call and more than 15 percent upside to target prices. It said that turned up five stocks: UMS Holdings, APAC Realty, HL Finance, Yangzijiang and SIA Engineering.