Doubt slipped into the local market in the Year of the Snake amid tapering talk, property-cooling measures and a penny-stock crash. At the end of the half-day trading session yesterday, the total value of 770 companies listed on Singapore Exchange (SGX) tracked by The Business Times was $899 billion, up from $887 billion at the end of 2012 but down substantially from the close to $1 trillion reached in April and May 2013.
The benchmark Straits Times Index (STI) closed at 3,167.43 points at end-2013, almost unchanged from 3,167.08 points a year earlier. Singapore was left out in 2013's developed markets rally, with the STI 8 per cent lower than its peak of 3,450 points in May. The bulls sought greener pastures in the United States and Japan, with the S&P 500 up 32 per cent and the Nikkei 225 up 60 per cent for the year.
On the local bourse, a full-fledged gallop is not expected in the Year of the Horse, with analysts' expectations ranging from a complete standstill to a tiny trot.
Summing up 2013, CIMB head of research Kenneth Ng said: "It was a tale of two halves. The Singapore market started brightly for the first five months and then weakened as US tapering talk came on."
Fears of rising rates from the US Federal Reserve slowing down or "tapering" its bond purchases since May had hit property counters and conglomerates operating regional businesses. Worries over emerging-market debt added to general market woes, though banks, telcos and some offshore and marine counters such as Ezion Holdings and Mermaid Maritime did well.
Fund managers such as Schroders and Baring Asset Management are steering clear of Singapore stocks this year, predicting a real estate slump hitting a number of companies.
UBS Wealth Management regional chief investment officer Kelvin Tay expects home prices to dip by 3 to 6 per cent this year. He told BT that the STI might be "range-bound" between 3,000 and 3,300 points this year. In an environment of tapering and global economic growth, exports look to have bottomed out but a recovery is likely to come only after its North Asian counterparts. Domestically, companies are grappling with slower growth, wage inflation and a labour shortage, he said.
"Against this backdrop, cyclical stocks with revenues leveraged to the global economic growth are likely to perform well," he said. "In contrast, pure yield plays with no growth prospects as well as domestically oriented companies are likely to underperform."
Carmen Lee, head of OCBC Investment Research, expects the STI to trade between 3,000 and 3,400 points, "supported on the low side by undemanding valuations and capped on the upper end by uncertainty on the global front".
Banks, oil and gas might outperform while property stocks might ease in the first half, she said.
Others are predicting a comeback for the local bourse, driven by better earnings, improved global economic growth and a flight to safety amid political and currency turmoil in the region.
Patrick Yau, Citi Singapore's head of research, said he expected 5 to 10 per cent returns this year, from companies finally making more profits as a result of stronger exports especially to Europe. This is compared to tepid growth in the past three years.
"In 2013, there was hardly any earnings growth, it was -2 per cent among the 60 companies we cover. Next year, there could be 9 per cent due to the base effect. It's the first time in three years where I'm thinking there's some upside," Mr Yau noted.
Citi Research has a 3,278-point target price for the STI in 2014, translating to a price-to-earnings ratio of 15.6 times. It prefers oil and gas play Keppel Corp, China-exposed Wilmar International and CapitaMalls Asia, DBS Bank, Keppel Land, as well as industrial plays ST Engineering and Venture Corp, which he reckons can benefit from a strengthening US dollar.
CIMB's Mr Ng is overweight on banks, capital goods and commodities.
Small-cap specialist DMG & Securities is among the most bullish, with a 3,480-point STI target for 2014. Referring to the penny-stock crash a few months ago, DMG said that "while some counters got their 'just desserts', many others were punished unjustifiably". DMG added that the small caps it covers are trading at nine times forecast 2014 earnings while growing more than 20 per cent.
In the small-cap space, construction sector stocks and S-chips should see investor interest, DMG said. Its top picks for the local market include Eu Yan Sang, King Wan, Lian Beng, Midas, MTQ, Nam Cheong and OSIM.
For Mr Yau, three sectors now look cheap: commodities, transport and real estate developers. Commodity firms such as Olam International, Wilmar International and Noble Group have been reducing their capital expenditure and cutting costs, so their financial situation might improve even though their outlook is not great, he said.
Oil prices are still high and affecting airlines and shipping companies. As for developers which have been hit by higher consumer debt and potentially rising rates, potential upside can come if property prices and volumes do not fall as much as feared.
"Stocks that are cheap can surprise on the upside if operating factors are better than expected," Mr Yau said. "With the market at an average level, if you want to outperform the market, you have to look at stocks growing much faster, or trading much cheaper than the market."
In terms of valuations, consumer stocks stand out as expensive, DBS Group Research said. They have corrected from valuations at two standard deviations above average after May and are now at one standard deviation above, and could correct further if earnings miss expectations.
One example is instant beverage maker Super Group, which took a tumble in November after unveiling disappointing Q3 results. Super fell from around $4.50 earlier in the year to a low of about $3. It traded at $3.80 yesterday.
SGX attracted a number of new listings in 2013, with notable players in property, energy and resources. The five biggest - SPH Reit, Mapletree Greater China Commercial Trust, KrisEnergy, OUE Hospitality Trust and Asian Pay TV Trust - added $8.2 billion to the local bourse.
While STI stalwarts SingTel, DBS, Thai Beverage and UOB were among the top five in the most value gained, it was secondary-listed insurance giant Prudential plc that stole the show, adding $13.4 billion to its market value, up 35 per cent from a year ago. The company had recently raised expectations for higher dividends by announcing ambitious growth and cash targets.
At the other end of the spectrum were stocks which suffered the greatest losses in value. All three Jardine conglomerate stocks languished in the bottom 10, along with property counters CapitaLand, City Development, Hongkong Land and Keppel Land. Other property plays - Yanlord, CapitaMall Trust, CapitaCommercial Trust - were not far behind. These companies lost a total of about $25 billion in value last year.
Then there were Asiasons, Blumont and LionGold, the penny-stocks trio which collectively lost $8 billion of market value last October just as suddenly after adding billions of dollars to their values months before.
Fraser & Neave, meanwhile, lost $9 billion of market value. This was because of a property business spin-off as well as capital distributions from a business segment review and from proceeds of its Asia Pacific Breweries sale.
Small, mid-cap plays
In the small to mid-cap segment, industrial waste gas treatment firm China Environment was an outperformer, rising more than seven times in value. Investors flocked to the firm amid rising profits and China's massive drive to clean up its air pollution problem.
Rowsley, Oxley Holdings and SIIC Environment were three notable mid-caps which vaulted over the $1 billion market value mark, with investors seeing these companies double, treble, even quadruple in price.
Rowsley is transforming itself into an Iskandar property play, while Oxley has pursued a string of overseas property acquisitions. SIIC Environment has reported significantly better earnings and is pursuing an expansion plan that includes a share placement and additional investments.
Aside from the three penny stocks, a prominent crash was bedlinen retailer Aussino, whose shops, until recently, could be sighted at local shopping malls. An unprofitable company over the past three years and on SGX's watchlist, Aussino made the news in mid-2012 when it seized on a hyped-up lifeline. It eyed a Myanmar petrol venture through a controversial reverse takeover deal with US-blacklisted Myanmar tycoon Zaw Zaw. Investor speculation reached fever pitch last Jan 31 when the stock traded at 29 cents.
But the deal ran into regulatory hurdles last April when SGX did not give the green light. Last July, the Myanmar deal was terminated. SGX subsequently rejected the company's bid for a time extension to meet listing requirements and the company was suspended after Dec 20 pending delisting.
A number of Aussino outlets, such as in Causeway Point and Junction 8, have closed. Its shares last traded at 0.6 cent - down 98 per cent from its peak, and down 96 per cent for the year. Something sobering to remember 2013 by, as you wake up to a new 2014.