Markets Insight

'Sell in May' unlikely to go away for now

The Singapore market may find it difficult to snap out of its recent poor run in the coming days, with a slew of uncertainties still weighing on sentiment.

From the latest United States job data to the persistent slowdown in China, the gloomy outlook leaves no reason for regional equity investors to ditch the adage of "sell in May and go away", market watchers said.

The US job growth in April was the slowest in seven months, with a fewer-than-expected 160,000 jobs created, fresh official data released over the weekend showed.

China will release its inflation and loans growth figures this week. Economists expect a slowdown in credit growth in April, although inflation could rise.

"What is happening now is the recessionary fears that triggered the January crash may be re-emerging as people continue to see signs of stagnating growth. Because there are still so many question marks, investors will want to stay on the side," CIMB Private Banking economist Song Seng Wun told The Straits Times.

As the headwinds gather, the local benchmark Straits Times Index (STI) may extend its losing streak after closing lower for 10 straight sessions - the longest such run since 2002.

Last week, the STI pared 3.8 per cent, part of the regional sell-off that pushed the MSCI Asia ex-Japan down around 3 per cent over the same period.

"There is really nothing to be excited about Asian equities. Investor attention will be on bonds - especially with the expectation that US interest rates may stay benign after the latest job data - and precious metals such as gold," Mr Song said.

Jefferies Hong Kong strategist Kenneth Chan agrees, noting that global equity funds saw their heaviest weekly outflow in eight months of around US$17 billion (S$23 billion) last week, while bond markets received an injection of US$5.6 billion.

Meanwhile, the price of gold, a popular safe-haven asset, rose to around US$1,290 on Friday, just below its 12-month high at US$1,293.

Still, there are counters that offer good value among Singapore shares, Mr Chan said.

"Although Singapore is an expensive market to buy growth, it is cheap based on a price to book of 1.1 times and also on a dividend yield of 4 per cent," he added.

"Singapore Airlines appeared on the screens based on cheap sales growth alongside positive earnings revisions. Similarly, Golden Agri-Resources offers cheap valuations and earnings upgrades. Meanwhile, Sembcorp Industries offers inexpensive quality."

Sembcorp Industries last week reported a 24.7 per cent year-on-year drop in first-quarter net profit to $107 million, still hitting 21 per cent of CIMB's full-year earnings forecast for the firm.

"Utilities profit was stable year on year, thanks to stronger (contribution from) China, the Middle East and United Kingdom. Catalysts could include stronger profits from overseas assets and divestments of none-core assets," CIMB analyst Lim Siew Khee said, keeping her buy call on Sembcorp Industries with a $3.10 target price, 14 per cent higher than the last close at $2.72.

Singapore Airlines will announce its results for the full year ended March 31 on Thursday. There are reasons to expect good news. Last week, its subsidiary Tiger Airways reported a full-year net profit of $282,000, a huge reversal from a $264.5 million net loss last time.

A version of this article appeared in the print edition of The Straits Times on May 09, 2016, with the headline ''Sell in May' unlikely to go away for now'. Print Edition | Subscribe