What's Driving Uptrend in the SGX Industrial Sector This Year?
According to a report from the Singapore Exchange (SGX), as of the end of February 2024, the industrial sector of the iEdge SG Advanced Manufacturing Index has experienced a net inflow of institutional funds, while other segments of the Singapore stock market have seen a net institutional outflow.
As of March 25th, 2024, the SGX has seen over 80 stocks maintaining positive returns. The industrial sector accounts for the highest proportion, reaching 30% of the over 80 stocks. The table below details the top 25 stocks with the highest Return on Equity (ROE) ratios out of the group of over 80 stocks as of March 25.
On March 26th, following the release of Singapore's February factory output figures showing a 3.8% increase, the industrial sector's momentum helped lift the $FTSE Singapore Straits Time Index(.STI.SG$ by 1.1%.
$YZJ Shipbldg SGD(BS6.SG$ has led the gains this year with a notable rise of 28.19%, followed by $Venture(V03.SG$ with a 4.85% increase, and $Keppel(BN4.SG$ with a 3.82% uptick. What factors have driven the increase in industrial sector stock prices?
Anticipated Monetary Easing Promoting Export Growth
In 2023, Singapore's exports declined due to a slowdown in manufacturing-led export growth. Tighter credit conditions caused by aggressive interest rate hikes across major economies and export markets have weighed down demand. Trade exports are expected to improve in 2024 amidst anticipation of interest rate cuts.
Moreover, against the backdrop of easing inflation, the Monetary Authority of Singapore (MAS) may adopt a more loose monetary policy. Should the Singapore dollar weaken, it would enhance the price competitiveness of Singapore's products and services, spurring export growth. An increase in exports will drive demand and development in the logistics sector.
According to Simply Wall Street, analysts are optimistic about the logistics industry, projecting a revenue increase of 38% over the next five years.
Singapore's Tech Sector Thrives Amid Semiconductor Boom
Investment bank JPMorgan has stated that despite other industries struggling amidst global macroeconomic uncertainty, the technology sector in the Asia-Pacific region has continued to grow against the backdrop of a semiconductor boom. The tech industry flourished during the COVID-19 pandemic as businesses accelerated their digitalization efforts, but faced a slowdown in 2022 and 2023 due to high inflation and interest rates that weakened consumer spending, hit product demand, and led to job cuts.
Ong Sin Ben, head of Asia emerging markets economic research at JPMorgan, indicated that Singapore "has seen a boost from the semiconductor boom." According to data from the Singapore Semiconductor Industry Association in their 2022 Semiconductor Business Connect, the country manufactures 20% of the world's chip equipment.
In a previous budget speech, Singapore's Deputy Prime Minister Lawrence Wong announced that Singapore will invest over 1 billion Singapore dollars (approximately 743 million US dollars) over the next five years to enhance its artificial intelligence capabilities further.
Airline Service Provider Sees Uptick from Passenger Surge
In 2023, Singapore's tourism rebounded to 13.6 million international visitors, 71% of pre-pandemic levels. The Singaporean government anticipates this recovery to continue into 2024, with international visitor numbers expected to reach 15 to 16 million, generating tourism revenue of about 26 to 27.5 billion Singapore dollars.
On March 1st, Alvin Tan, State Minister for Trade and Industry, revealed Singapore's plan to invest over S$300 million in the tourism sector's post-pandemic recovery. The surge in tourism is set to boost air transport-related businesses, like $SATS(S58.SG$, an airline service provider providing ground handling and in-flight catering services to airlines in Asia and Australia, citing passenger traffic rebound as a key factor in its performance uptick.
Demand Surges for Clean Energy Vessels
Due to ongoing climate-related regulations by authorities worldwide, the global outlook for the shipbuilding industry remains optimistic.
"In the medium term, maritime decarbonization will continue to be the main growth driver for the industry. As the trend of tightening policies becomes more evident, ship operators are accelerating their fleet renewal programs to avoid potential financial impacts due to non-compliance," said Ren Letian, CEO and Executive Chairman of YZJ.
YZJ, thriving under current trends, held 182 pending ship orders worth $14.5 billion at 2023's end. It gained 97 new orders valued at $7.1 billion in 2023, extending its profitability through 2027.
2024 Budget Blueprint to Boost Energy and Industrial Growth
Deputy Prime Minister Lawrence Wong announced three key initiatives to boost the clean energy sector: a $5 billion Future Energy Fund for clean infrastructure, $2 billion to enhance the Refundable Investment Credit for low-carbon manufacturing and research, and $3 billion for the RIE2025 plan. Several companies stand to benefit from these programs. Companies like $Sembcorp Ind(U96.SG$, expanding into solar energy, Keppel Corporation with its European and German renewable investments, and $ST Engineering(S63.SG$'s move into smart utilities, are poised to benefit.
Sources: Seatrade Maritime News, CNA, CNBC, The Edge
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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