Singapore Stocks Poised to Gain from US Fed Rate Cuts

Impact of Anticipated US Federal Reserve Rate Cuts on Singapore’s Stock Market

As the US Federal Reserve gears up for an expected rate cut this month, the Singapore stock market has already enjoyed a total return of 4.1% since the end of June, buoyed by the anticipation of lower interest rates and a strengthening currency. Analysts are optimistic about the midterm benefits of this easing cycle for Singapore’s stock market, which could support corporate profit growth.

Key Beneficiaries: Real Estate Investment Trusts, Developers, and High Debt Companies

Lu Minyi, Deputy Director of Research at China Galaxy Securities Singapore, noted in a recent report that during the last two rate cut cycles in 2007 and 2019, most Singapore stocks posted positive returns one month prior to the actual rate cuts. He expects this year to be no different. As the rate cut cycle draws near, sectors like internet, consumer goods, transportation, and Real Estate Investment Trusts (REITs) have performed well over the past month.

“If there are no major adverse factors, potential beneficiaries of the rate cuts include real estate investment trusts, developers, and companies with high levels of debt. The reduced capital costs resulting from lower interest rates could also enhance valuations for internet companies,” Lu stated.

Currency Fluctuations and Their Impact

However, currency fluctuations accompanying the rate cuts could impact certain stocks. Lu noted that from January 2022 to July 2024, ASEAN currencies experienced significant depreciation. From August 1 to 23 of this year, however, ASEAN currencies rebounded by 5% to 10% against the US dollar.

The narrowing interest rate differential with the US dollar is expected to favor ASEAN currency appreciation. China Galaxy International Securities economists predict that by the end of 2025, the Malaysian ringgit, Indonesian rupiah, and Thai baht will appreciate further by 1% to 2.7% against the US dollar, while the Singapore dollar is expected to remain relatively stable.

Weak US Dollar: A Boon for Certain Corporations

The weakening US dollar, coupled with stronger ASEAN currencies, could benefit companies that report financials in US dollars, such as Japfa and Wilmar International, as well as internet companies like SEA and Grab. Conversely, a weaker dollar could negatively impact tech manufacturers holding substantial net long USD positions and companies whose sales prices are pegged to the dollar, like Riverstone Holdings.

During the recent Q2 earnings season, about 40% of Singapore companies reported results below expectations, 30% exceeded expectations, and another 30% met expectations. The tech sector generally underperformed due to challenging operating conditions and delayed recovery prospects, with only Frencken Group meeting expectations. However, most tech companies anticipate an improved business environment in the second half of the year and are more optimistic about demand prospects for FY2025. Additionally, a lack of new private residential launches in the first half of the year dragged down quarterly performances for developers and real estate agencies.

Capital Goods Sector Outperforms Expectations

The capital goods sector generally outperformed due to new orders and effective cost management. Following the quarterly earnings release, China Galaxy International Securities revised its earnings expectations for Singapore companies downward by 0.7% for FY2024 and by 0.8% for FY2025, primarily due to poor performances in the real estate, tech, transportation, and commodities sectors. However, improvements in the financial sector partially offset these effects.

The Easing Interest Rate Cycle: A Midterm Boon

In the midterm, Lu believes that an easing interest rate cycle will aid corporate profit growth and reduce capital costs. He is bullish on sectors such as capital goods, commodities, construction, gaming, internet, real estate investment trusts, tech, and telecommunications.

Among individual stocks, ComfortDelGro, CapitaLand Ascendas REIT, FLCT, iFAST Corp, SATS, Sembcorp Industries, Singtel, ST Engineering, Seatrium, and UOB are China Galaxy International Securities’ top picks. Additionally, small caps like CSE Global, Hong Leong Asia, and SingPost are also viewed favorably.

Relevant news

bitcoin
Bitcoin (BTC) USD 118,692.00
ethereum
Ethereum (ETH) USD 3,793.18
xrp
XRP (XRP) USD 3.14
tether
Tether (USDT) USD 0.9999
bnb
BNB (BNB) USD 829.28
solana
Solana (SOL) USD 184.32
usd-coin
USDC (USDC) USD 0.999799
dogecoin
Dogecoin (DOGE) USD 0.227326
staked-ether
Lido Staked Ether (STETH) USD 3,788.92
tron
TRON (TRX) USD 0.327422
cardano
Cardano (ADA) USD 0.793525
wrapped-bitcoin
Wrapped Bitcoin (WBTC) USD 118,548.00
wrapped-steth
Wrapped stETH (WSTETH) USD 4,573.09
hyperliquid
Hyperliquid (HYPE) USD 44.02
sui
Sui (SUI) USD 3.94
stellar
Stellar (XLM) USD 0.42303
chainlink
Chainlink (LINK) USD 18.30
wrapped-beacon-eth
Wrapped Beacon ETH (WBETH) USD 4,074.04
bitcoin-cash
Bitcoin Cash (BCH) USD 583.82
hedera-hashgraph
Hedera (HBAR) USD 0.269681
wrapped-eeth
Wrapped eETH (WEETH) USD 4,062.72
avalanche-2
Avalanche (AVAX) USD 25.02
weth
WETH (WETH) USD 3,793.61
litecoin
Litecoin (LTC) USD 109.43
leo-token
LEO Token (LEO) USD 8.97
the-open-network
Toncoin (TON) USD 3.24
shiba-inu
Shiba Inu (SHIB) USD 0.000013
ethena-usde
Ethena USDe (USDE) USD 1.00
usds
USDS (USDS) USD 0.999693
binance-bridged-usdt-bnb-smart-chain
Binance Bridged USDT (BNB Smart Chain) (BSC-USD) USD 1.00
whitebit
WhiteBIT Coin (WBT) USD 44.37
coinbase-wrapped-btc
Coinbase Wrapped BTC (CBBTC) USD 118,784.00
uniswap
Uniswap (UNI) USD 10.43
polkadot
Polkadot (DOT) USD 3.99
monero
Monero (XMR) USD 318.48
bitget-token
Bitget Token (BGB) USD 4.60
pepe
Pepe (PEPE) USD 0.000012
crypto-com-chain
Cronos (CRO) USD 0.146889
aave
Aave (AAVE) USD 290.35
ethena-staked-usde
Ethena Staked USDe (SUSDE) USD 1.19
ethena
Ethena (ENA) USD 0.625368
bittensor
Bittensor (TAO) USD 401.88
dai
Dai (DAI) USD 0.999927
pi-network
Pi Network (PI) USD 0.439722
near
NEAR Protocol (NEAR) USD 2.74
ethereum-classic
Ethereum Classic (ETC) USD 21.92
ondo-finance
Ondo (ONDO) USD 0.989447
internet-computer
Internet Computer (ICP) USD 5.57
jito-staked-sol
Jito Staked SOL (JITOSOL) USD 224.97
okb
OKB (OKB) USD 48.46
aptos
Aptos (APT) USD 4.66
mantle
Mantle (MNT) USD 0.780038
pudgy-penguins
Pudgy Penguins (PENGU) USD 0.041213
kaspa
Kaspa (KAS) USD 0.097862
bonk
Bonk (BONK) USD 0.000032
blackrock-usd-institutional-digital-liquidity-fund
BlackRock USD Institutional Digital Liquidity Fund (BUIDL) USD 1.00
algorand
Algorand (ALGO) USD 0.264387
binance-peg-weth
Binance-Peg WETH (WETH) USD 3,797.32
arbitrum
Arbitrum (ARB) USD 0.432173
usd1-wlfi
USD1 (USD1) USD 1.00
cosmos
Cosmos Hub (ATOM) USD 4.64
gatechain-token
Gate (GT) USD 17.86
vechain
VeChain (VET) USD 0.024776
render-token
Render (RENDER) USD 4.07
polygon-ecosystem-token
POL (ex-MATIC) (POL) USD 0.228261
worldcoin-wld
Worldcoin (WLD) USD 1.11
fasttoken
Fasttoken (FTN) USD 4.59
spx6900
SPX6900 (SPX) USD 2.13
official-trump
Official Trump (TRUMP) USD 9.67
sky
Sky (SKY) USD 0.089807
sei-network
Sei (SEI) USD 0.321964
fetch-ai
Artificial Superintelligence Alliance (FET) USD 0.712959
binance-staked-sol
Binance Staked SOL (BNSOL) USD 196.37
rocket-pool-eth
Rocket Pool ETH (RETH) USD 4,314.07
quant-network
Quant (QNT) USD 122.39
filecoin
Filecoin (FIL) USD 2.61
flare-networks
Flare (FLR) USD 0.024992
kelp-dao-restaked-eth
Kelp DAO Restaked ETH (RSETH) USD 3,978.10
lombard-staked-btc
Lombard Staked BTC (LBTC) USD 118,259.00
susds
sUSDS (SUSDS) USD 1.06
jupiter-exchange-solana
Jupiter (JUP) USD 0.550257
jupiter-perpetuals-liquidity-provider-token
Jupiter Perpetuals Liquidity Provider Token (JLP) USD 5.08
story-2
Story (IP) USD 5.52
kucoin-shares
KuCoin (KCS) USD 11.49
xdce-crowd-sale
XDC Network (XDC) USD 0.089333
usdtb
USDtb (USDTB) USD 0.999726
stakewise-v3-oseth
StakeWise Staked ETH (OSETH) USD 3,989.26
injective-protocol
Injective (INJ) USD 14.56
mantle-staked-ether
Mantle Staked Ether (METH) USD 4,051.75
celestia
Celestia (TIA) USD 1.91
liquid-staked-ethereum
Liquid Staked ETH (LSETH) USD 4,098.97
first-digital-usd
First Digital USD (FDUSD) USD 0.998621
curve-dao-token
Curve DAO (CRV) USD 0.991525
usdt0
USDT0 (USDT0) USD 0.999877
nexo
NEXO (NEXO) USD 1.31
optimism
Optimism (OP) USD 0.751548
renzo-restaked-eth
Renzo Restaked ETH (EZETH) USD 3,996.97
blockstack
Stacks (STX) USD 0.78727
polygon-bridged-usdt-polygon
Polygon Bridged USDT (Polygon) (USDT) USD 0.999783
falcon-finance
Falcon USD (USDF) USD 0.999456