ANALYSTS SAY: Buy, Sell, Hold (3 Jan)

UOB KAYHIAN

Banks
A slowdown in growth

■ System loans shrank 1.8% yoy in Nov 22. This was due to a 6.8% yoy contraction in non-resident loans, as resident loans expanded 1.3% yoy.
■ Deposits rose 6.4% yoy in Nov 22 – the majority of these inflows were in FCY. Unsurprisingly, most of these were placed in fixed deposits.
■ Reiterate Neutral. We think that softening US inflation readings provide a firmer argument for the Fed to slow the pace of its rate hikes.

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STRATEGY – SINGAPORE
Alpha Picks: Adding MLT, Removing LREIT

Our Alpha Picks’ 5.5% and 8.1% returns for 4Q22 and 2022 respectively easily beat the STI by 1.6ppt and 4.0ppt respectively on a market-cap weighted basis. For Jan 23, we rejig our REIT preference by adding Mapletree Logistics Trust (MLT) and cutting losses on Lendlease REIT (LREIT). We like MLT’s exposure to the China reopening story as its China and Hong Kong portfolio constituted 21% and 23% of its portfolio valuation respectively as at end-3Q22. 

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UOB KAYHIAN

REITs – Singapore
China Switches Decisively To Living With COVID-19 As An Endemic Disease

China is weathering an exponential surge in COVID-19 infections, but new infections should subside after hitting a peak in January. Hotels and serviced residences in Singapore, Australia and Japan will benefit from an influx of Chinese tourists. Malls and offices in China will see a recovery in shopper traffic and physical occupancy. BUY CLAS (Target: S$1.27), CDREIT (Target: S$1.37), FEHT (Target: S$0.71), MLT (Target: S$1.87), MPACT (Target: S$2.00) and SASSR (Target: S$1.12). Maintain OVERWEIGHT.

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China Resources Land Ltd (1109 HK) - Top sector pick for 2023 

China Resources Land (CR Land) is a high-quality state-owned enterprise (SOE) Chinese property developer with a focus on Tier-1 and 2 cities. One of its competitive advantages is its expertise in urban renewal projects, which it has a first mover advantage. Another investment merit of CR Land is its enviable investment properties portfolio (mostly shopping malls), which allows it to garner robust recurring income streams. This provides stronger earnings visibility and diversification, notwithstanding the adverse impact from Covid-19 related lockdowns and rental concessions extended to its retail tenants. CR Land had also successfully spun off a partial stake in its property management arm in 2020 and unlocked value for its shareholders. Although CR Land is currently trading at a premium to most of its peers’ forward price-to-earnings (P/E) ratio, we believe this is justifiable given its stronger net margin profile and track record. The market also tends to ascribe a higher valuation multiple to higher quality developers in times of uncertainty and volatility. BUY.

2023: Finding Prosperity

Welcome back! 2023 begins with shades of optimism. European markets had a stronger start and China is further relaxing its Covid policies. While the Mainland is not out of the woods, official expectations for the country reaching herd immunity by April could give a big boost to revenge spending. Our Quant Team’s latest screens identify 8 key beneficiaries: Wilmar, HRNet, Press Metal Aluminium, Sime Darby, PTT Public, Vitrox, China Hongqiao Group, Chow Tai Fook Jewellery.

Despite this, the potential for a US and global recession remains heightened. This is a major concern that will drive market volatility in 2023. However, we see signs of ASEAN partially decoupling from a US recession scenario as intra-regional trade take off. This should provide a defensive harbour amidst market uncertainty. In Singapore, our key defensive picks include DBS, UOB, OCBC, SingTel, Sembcorp, ST Eng, Raffles Medical, ComfortDelGro and CLI.

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Indonesia Metal
Paving way to becoming a global EV hub

Race to zero emissions
The global shift towards net-zero and clean energy will have a far-reaching impact on mineral demand over the next 20 years. We expect nickel used in electric vehicles (EVs) and battery storage to increase seven-fold by 2040, as EV penetration rises.

The key challenge is whether supply can be ramped up fast enough to meet demand. Given the country’s abundant resources, Indonesia is strategically positioned to become a major player in the global EV supply chain, attracting global investments and opening up numerous opportunities for growth projects. 

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