ST Engineering, Singtel and the banks push the STI up 2.3%

Date: March 24, 2025

• Despite a shaky Wall St, the STI managed a 2.3% rise to 3,926.45
• ST Engineering’s 6.6% gain to S$6.62 played a key part in the STI’s rise
• As expected, US Fed kept interest rates unchanged but said inflation from tariffs should be “transitory’’
• US major indices managed small gains, ending 4-week losing streak
• Analysts upgraded STE with target prices above S$7
• ESR-REIT’s sponsor ESR Group warned of US$730 million loss on asset and project revaluations
• Singapore’s NODX up 7.6% in Feb but Trump’s tariffs pose challenges

 

ST Engineering, Singtel and the three banks enable STI to rise 2.3%

ST Engineering’s (STE) meteoric rise to all-time highs, firm support for the banks and Singtel were probably the main features of trading in the local stock market last week in which the Straits Times Index shrugged off uncertain trading on Wall Street to chalk up a 90-points or 2.3% rise to 3,926.45.

Average daily volume traded however, dipped slightly from S$1.68b the week before to S$1.47b.

For the week, UOB rose every day whilst DBS and OCBC rose on four days, only weakening on Friday.

For the week, DBS’s net gain was S$1.06 or 2.4% at S$45.31, UOB’s was S$1.24 or 3.4% at S$37.95 and OCBC rose S$0.50 or 3% to S$16.98.

STE’s gain for the week was S$0.41 or 6.6% at S$6.62. It had closed at an all-time high of S$6.91 on Thursday. Singtel in the meantime, gained S$0.10 or 3% at S$3.42.

The Fed kept rates steady, signalled tariff-created uncertainty ahead but said inflation likely to be “transitory’’

As expected, the US Federal Open Markets Committee voted unanimously on Wednesday to hold the target range for the federal-funds rate at 4.25% to 4.5%, and once again pencilled in a median forecast for two rate cuts in 2025, as they did in December.

But significant changes, announced and expected, in federal policies on trade, immigration, and fiscal spending mean rate expectations could change later this year. In other words, the Fed may cut twice, or more or less, or not at all.

“It’s really hard to know how this is going to work out,” Fed Chair Jerome Powell said Wednesday. “I don’t know anyone who has a lot of confidence in their forecast.”

“The new administration is in the process of implementing significant policy changes in four distinct areas, trade, immigration, fiscal policy and regulation,” Fed chairman Jerome Powell said during a news conference. “It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy’’.

However, Powell also said any inflation caused by U.S. President Donald Trump’s tariffs would only be “transitory.” Market participants saw the developments as dovish.

All three major US indices managed modest weekly gains ending a four-week losing streak – the Dow Jones Industrial Average’s rise was 1.2%, the S&P 500’s was 0.5% and the Nasdaq Composite’s was 0.2%.

Hot stock: ST Engineering

In the year to date, ST Engineering is one of the biggest blue-chip gainers. Its share price has been on a tear through the year and has advanced as much as 41% in terms of its closing price.

This came after it announced its five-year targets at its investor day on Tuesday when it said it aims to achieve revenue of S$17 billion and net profit improvement that outpaces its top-line increases by up to five percentage points annually over the next five years.

As a result, analysts upgraded the stock. RHB on Thursday raised its target price to S$7.80 from its previous S$5.90 and maintained its “buy” call. CGS International on Tuesday increased its target price to S$7.40 from S$5.60 previously, while reiterating its “add” call.

RHB analyst Shekhar Jaiswal said ST Engineering’s guidance targets imply “steady long-term growth” for the company, even though his estimates for its near-term earnings remained unchanged.

Maybank noted that from 2026 onwards, STE will pay out a third of earnings growth as incremental dividends whilst surplus cash will be reinvested or used to enhance balance sheet flexibility.

“We raise our discounted cash flow-based target price to S$7.10 on higher operating cash flows and lower WACC (weighted average cost of capital). While valuation is steep at 23.4x PE, visibility of earnings/dividend growth and strong thematic of defence keeps us on BUY’’ said Maybank.

ESR Group warned of US$730 million loss on asset and project revaluations

Hong Kong-listed real asset manager ESR Group, the sponsor of SGX-listed ESR Real Estate Investment Trust (ESR-REIT), expects to report a net loss of about US$730 million for the financial year ended Dec 31, 2024.

This would mark a reversal from the US$268 million net profit recorded in the prior year, said the group in a profit warning issued on Thursday.

The decline is mainly attributable to marked-to-market losses in asset and project revaluations. This was led by a US$320 million hit related to certain newly completed properties in China.

In December, a consortium of investors led by Starwood Capital Group, Sixth Street Partners and SSW Partners offered to take ESR Group private at HK$13 a share in cash.

The proposed offer is valued at HK$55.2 billion (S$9.5 billion) on an equity-value basis.

Shares of ESR closed HK$0.02 lower at HK$12.38 on Friday, whilst units of ESR-REIT on SGX added S$0.005 at S$0.25.

Singapore’s NODX up 7.6% in Feb but Trump’s tariffs pose challenges

Singapore’s non-oil domestic exports (NODX) grew 7.6% in February, reversing from the previous month’s contraction, as both electronics and non-electronics exports charted increases.

February’s NODX figure is a turnaround from the previous month’s 2.1% decline, but underperformed against the median 9.7% growth forecast in a Bloomberg poll of private-sector economists.

Private-sector economists warned that export growth could continue to slow if US President Donald Trump’s further tariff threats materialise.

“Singapore faces the risk of Trump’s reciprocal tariffs despite having a free trade agreement with the US, a bilateral trade deficit and low tariffs on US imports,” said Maybank economists Chua Hak Bin and Brian Lee.

The US president plans to impose tariffs of around 25% on semiconductor and pharmaceutical imports – a move which is likely to negatively impact Singapore, given that it is integrated in the global supply chain for these products, noted Standard Chartered Asia economist Jonathan Koh.

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