While this is an opinion piece, I do feel its necessary for me to set the tone for the rest of the year for my trading ideas. Essentially, I feel that STI has been lacking behind all three US Indices in 2019 and thus still has some room to climb.
2020 is a year of accumulation for Blue Chips Stocks
Budget 2020 will be focusing on the economy, health, housing, and transport for the mainstream population. During an economic slowdown, the SG govt will be pushing for business sustainability. The need to subsidize some businesses is emphasized by the slowing growth of the economy due to impacts of trade tensions between the US and China. This temporal boost will help alleviate lower revenues with potential wage supplements or tax reductions in 2020.
According to the short interview with Lee Hsien Long, it was mentioned that Budget 2020 will mainly focus on areas such as health, housing, and transport. This list is not exhaustive but we can infer from his message that sustaining businesses is of utmost importance. As such, we should be able to expect more financial aid in businesses especially in sectors that are serving the general populous. These businesses would include some of our big names in STI such as Singtel and ComfortDelgro off the top of my head.
Virtual bank and Smart Nation Initiatives (include 5G)
I will expound into virtual banking a little in this section because it is a contentious matter. Traditionally, only physical banks had the right to hold cash deposits and provide various financial services to consumers. The advent of digital technologies challenges the legitimacy of brick-and-mortar shops. With the removal of physical branches, banks can operate fully online and facilitate all transactions virtually. In addition, the savings from overheads will also be feedback into higher interest rates for deposits. But how much higher can the interest rate be for virtual banks and will SDIC guarantee their deposits up to 75k? We will expect existing banks to retaliate with their own retention programs. Overall I feel that this competition is beneficial for banks to stay relevant by upgrading their own online platforms.
Smart nation initiatives have been quietly underway for a while now. This includes technologies that rely heavily on advanced communications and processing powers. As such, Singtel is positioned well in the next decade as the 5G rollout will increase overtime to enhance businesses in Singapore. Not to mention that the Singapore govt will also be heavily subsidizing and investing in this area. From that, we can expect further growth in revenue for companies involved thought profits might only catch up later on.
Support Buy and Hold Method in 2020
Many businesses in Singapore are still recovering from the impacts of the US and China Trade War. Furthermore, as the trade discussions go into phase 2 and so on, there is likely to be a boost in trade for many businesses. Therefore, there will be a restoration of investor’s trust in the Singapore market in 2020. As many corporations will be focusing on preparing themselves for further technological developments and increased communications to stay relevant in the digital economy.
Closing Thoughts
2020 will be a good year for investors to stay put and hold. Unlike in 2019 where there are literal dates where investors can expect to see a showdown between the US and China, 2020 will see less of such direct confrontation. As the US elections approach, a milder Trump is to be expected. We will be doing a Budget summary of SG Budget 2020 after Feb 18. Do stay tuned for more trading ideas and investment tips on Loopholes Singapore.
