Markets Insight

Less prominent stocks offer value, growth

US stocks declined on Monday for their worst performance in nearly a month, weighed down by a pullback in the financial and consumer discretionary sectors as some investors booked profits on the heels of a record-setting week.

5 non-STI sectors have averaged 9% in total returns, says strategist

Key Asian bourses enjoyed a further strong run-up last week, taking their cue from a Wall Street rally sparked by Mr Donald Trump's election.

But market watchers are uncertain about just how much longer the good times will roll on, as investors often turn more cautious as the end of the year approaches.

November's US non-farm payrolls data, the main gauge of job growth, is due out on Friday. It could affect the chances of an expected Federal Reserve interest rate rise at the Fed's mid-December meeting.

A particularly strong performer last week was Australia, where the benchmark ASX 500 index jumped 2.8 per cent. Hong Kong's Hang Seng put on 1.7 per cent and the Shanghai Composite index added 2.2 per cent. Japan's Nikkei also had a good run, up 2.3 per cent. At home, the Straits Times Index (STI) closed 0.73 per cent higher for the week that offered less lead from the US, given the Thanksgiving holiday.

KGI Fraser Securities Singapore strategist Nicholas Teo suggests the local market may be the beneficiary as the year end approaches.

"The end of the year is usually the time when people take profit or move their money to less volatile markets. This is not a 'buy' recommendation but I think there may be some who pull out of, say, Hong Kong or Thailand to seek the safety a market like Singapore offers."

But given the relative stagnation of benchmark stocks in Singapore, investors should not limit themselves to the STI components for value and growth. Less well-known stocks offer plenty of vibrancy.

"Time has told us that investors should look beyond the benchmark into various segments of the market. In the first 10 months this year, the five non-STI sectors have averaged 9 per cent in total returns," Singapore Exchange market strategist Geoff Howie said last week.

"These sectors were - in order of performance - materials, information technology, energy, healthcare and utilities, with materials' total return reaching 20 per cent and infotech 15 per cent," Mr Howie added.

Notable materials or resources stocks are gold firms CNMC Goldmine and Wilton Resources which got a hefty boost in late June as they tracked surging prices of bullion.

The infotech sector's total return was 15 per cent, followed by energy at 4.8 per cent, healthcare at 4.2 per cent and utilities at 1.4 per cent, SGX data showed. The return of real estate stocks was 1.4 per cent while banks shed 2.4 per cent in the first 10 months of this year. The two sectors account for 47 per cent of the STI.

The SGX last week held a corporate day as part of its outreach. Representatives of less well-known small- and mid-cap firms highlighted their potential and outlook, including Singapore Myanmar Investco (SMI).

The firm is one of the few Singapore-listed companies with a business focus on Myanmar. In the six months to Sept 30, it suffered a net loss of US$2.37 million (S$3.4 million), but CEO Mark Bedingham said turnaround is imminent.

"Our duty-free retail business at Yangon International Airport was started just in September, and now we dominate the business with 35 outlets, while our Europcar car rental business continues to grow," he told The Straits Times. Europcar is the first international car rental service in Myanmar. SMI shares last closed at 64 cents, having gained about 50 per cent over the past month.

A version of this article appeared in the print edition of The Straits Times on November 28, 2016, with the headline 'Less prominent stocks offer value, growth'. Print Edition | Subscribe