Markets Insight

Investors spooked amid Brexit fears

Major markets down over uncertainty on Europe, but local property sector looking up

A worker inspecting Thai Beverage Chang beer at a brewery. Thai Beverage has been one of the few companies in the local market to remain resilient over the past month.
A worker inspecting Thai Beverage Chang beer at a brewery. Thai Beverage has been one of the few companies in the local market to remain resilient over the past month.PHOTO: BLOOMBERG

If last week is any indication of how markets may move in the week ahead, then investors are likely to feel the jitters.

Brexit is on the cards and few are willing to stick their necks out on whether the Brits will vote to stay or leave the European Union when the referendum comes around on Thursday.

Many have already rushed for cover, leaving the United States top indices - the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite - all down by more than 1 per cent over the past week.

The picture was not different in Asia. MSCI Asia ex-Japan shed 2.7 per cent for the week, while Singapore's benchmark Straits Times Index pared 2.11 per cent. This was despite a mini-rally on Friday after the death of British MP Jo Cox prompted a temporary suspension of campaigning and gave hope that the the Brits' "remain" camp may receive more support.

Barring this potential swing in the so far evenly split public opinion, investors will do well to brace themselves for Brexit, which some market watchers warned may cripple Europe's political future.

"For the rest of the world, it is not just the fate of the British economy that concerns them, but the broader impact on the European Union," IG Markets strategist Bernard Aw said.

Meanwhile, other market events will also take place this week. The central banks in the Philippines and Thailand will have their latest policy meetings, and both are expected to hold their rates steady.

In Singapore, May's industrial production figures will be out on Friday, and Standard Chartered economist Jeff Ng expects a 4.1 per cent year-on-year rise after April's 2.9 per cent increase.

With much distraction on the side, few counters in the local market have managed to stay resilient over the past month.

But it was not all carnage. A few have stood firm, with Thai Beverage standing out. Since announcing its stellar first-quarter results - with net profit up 30 per cent year on year - on May 13, Thai Beverage shares have put on 22.7 per cent to 92 cents at last close, significantly outperforming STI's 1 per cent gain in the same period.

The firm's growth outlook is looking positive thanks to its dominance in the beer segment and potential acquisitions to further diversify revenue sources into countries outside Thailand, OCBC analyst Jodie Foo said last week.

"Notably, Vietnam looks to be a potentially important market, with Saigon Beer Alcohol Beverage Corp reportedly seeking official approval to sell 53 per cent of its stake through public auction. In addition, Vinamilk, in which F&N holds an 11 per cent stake, had also removed its foreign ownership cap."

However, the bullish share prices may have limited upside, Ms Foo cautioned, giving Thai Beverage a hold call with a fair value of 89 cents.

For KGI Fraser Securities trading strategist Nicholas Teo, another sector to watch is property, after the SRX Property Price Index showed a 35.7 per cent month-on- month increase in May resale volume, alongside a 41.2 per cent month-on-month increase in May for new private home sales.

"Granted, we may not have sufficient data points to conclude with any certainty that these 'green shoots' may actually translate into a fuller bloom," Mr Teo said in a note last Friday.

"However, this news, coupled with the heightened speculation... could warrant a relook at a sector long plagued by negative news flow."

City Developments has been the best-performing developer counter on the STI, up 8.2 per cent over the past month to $8.85 at last close.

A version of this article appeared in the print edition of The Straits Times on June 20, 2016, with the headline 'Investors spooked amid Brexit fears'. Print Edition | Subscribe