IT sector third-best performing on SGX

There are 73 IT stocks listed on the Singapore Exchange with a combined market capitalisation of about $10 billion as at end October.
There are 73 IT stocks listed on the Singapore Exchange with a combined market capitalisation of about $10 billion as at end October.ST PHOTO: CHEW SENG KIM

It is holding up well after consumer staples, materials despite uncertain global market

Information technology (IT) stocks listed here have held up notably well amid growing uncertainty across global markets, making up the third-best performing sector on the Singapore Exchange (SGX) so far this year.

The sector has turned in total returns of 15 per cent from the start of the year to Oct 31, easily surpassing the Straits Times Index's (STI's) 1 per cent, said SGX vice-president of research and products Lionel Lin at a recent briefing.

Total returns from the sector in the last five years are 83 per cent, well up on the STI's 14 per cent.

The two better-performing sectors so far this year are consumer staples, which has delivered total returns of 26 per cent, and materials with total returns of 20 per cent.

Mr Lin said a hypothetical investor who had bought into the sector at its nadir in January and held it until now would have yielded close to 30 per cent in total returns.

"Many investors are familiar with Reits, healthcare and consumer stocks listed on the SGX, and may have overlooked the IT sector's year-to-date outperformance amid the global economic uncertainty," Mr Lin told The Straits Times.

"Singapore is Asia's technology hub, and as we move towards becoming a 'Smart Nation', many of these IT companies will help form much of the new economy's foundation and play a key role as disruptive technologies come into play."

Many of these disruptive technologies - artificial intelligence, big data, Internet of Things and robotics - still require technology hardware manufacturing, he said.

This means companies listed here are well positioned to grow, thanks to Singapore's stronghold in semiconductors and technology hardware manufacturing.

There are 73 IT stocks listed on the SGX with a combined market capitalisation of about $10 billion as at end October.

About 67 per cent of these stocks are net cash companies.

The sector's average dividend yield stands at 4.4 per cent, which is comparable with global IT peers, said Mr Lin. This is higher than the STI's 3.9 per cent.

Electronics manufacturing services provider Venture Corporation ranked as the largest stock in the sector as at end October with a market cap of $2.64 billion. Its three-year median returns on equity (ROE) was 7.2 per cent.

It was followed by Silverlake Axis, a global technology provider to financial institutions, which had a market cap of $1.69 billion and a three-year median ROE of 44.3 per cent.

A version of this article appeared in the print edition of The Straits Times on November 24, 2016, with the headline 'IT sector third-best performing on SGX'. Print Edition | Subscribe