Why did the Venture share price spike up 8% in four days?
Venture Corporation’s market capitalisation skyrocketed this week as the Singapore government eased lockdown measures in a surprise move.
Shares of Singapore-headquartered technology group Venture Corporation, a 12,000-person strong company with more than 30 subsidiaries and affiliates spread across Southeast Asia, Northeast Asia, America and Europe – has escalated nearly 8% since the start of this week.
Why is Venture’s share price rising rapidly again?
As at the close of Thursday 18 June 2020, Venture stocks were trading at S$16.23 each, based on the latest IG data.
The sharp increase has coincided with a couple of factors.
Firstly, the Singapore government on Monday 15 June unexpectedly eased its lockdown restrictions, announcing that the country will move into a so-called ‘phase two’ starting this Friday 19 June.
As part of phase two, a majority of retail and food and beverage businesses may reopen their physical outlets. Food and beverage dine-in will also be allowed to resume, subject to liquor sales and consumption ceasing at 2230 hours.
Developments in the US have also given the Singapore stock market a boost. On Monday, US central bank – the Federal Reserve – said it will start purchasing individual corporate bonds on Tuesday through the secondary market corporate credit facility (SMCCF). US President Donald Trump was also reportedly mulling the possibility of a US$1 trillion infrastructure spending plan to boost the economy.
As IG Asia market strategist Pan Jingyi noted in a client note earlier this week, the local market also ‘remains largely externally driven’, with the US reports giving Singapore stocks – including Venture – a second wind.
Technical forecast of the Venture share price
In a premium technical analysis, Pan observed that the asset saw a strong recovery from the March dip, retracing approximately three quarters of the dip by mid-April to as high as S$16.34.
Since then, however, prices have been mostly caught in a narrow range trade between S$15 to S$16, apart from a false break of the 76.4% Fibonacci retracement level noted in early June alongside the broad market rally thanks to the reopening of businesses and lifting of Covid-19 lockdown restrictions both in Singapore and abroad.
As it stands right now, prices are eyeing another attempt at breaking out on the upside from the current rangebound trade, Pan noted. ‘A clear break here opens up room towards the S$16.70 resistance ahead of the S$17.00 figure,’ she added.
Venture share price forecast: fundamental analysis
Elsewhere, the stock received a consensus 12-month share price target of S$15.38 a share, based on five analyst reports from last month. This is 5.2% lower than the stock’s current bid price.
DBS researchers, in particular, had maintained a ‘hold’ rating for the stock, as they believe there is limited target price upside for the stock.
Their rationale was that Covid-19’s damage to the supply and demand side of the entire technology value chain would take time to heal. On that note, they estimated that Venture’s FY2020 and FY2021 full-year earnings will fall even more than initially projected. Subsequently, they also lowered their earnings forecast for both years by an additional 12% and 7%.
Their most bullish case is predicated on the fact that the company appears well-positioned for longer term growth and recovery, thanks to its expertise and established position in the technology sector, as well as its strong balance sheet strength.
What’s the story behind Venture’s share price trajectory this year?
Venture has been an interesting case study here on the Singapore equity scene.
It was one of the few SGX stocks that managed to recover most of the losses posted in March this year, as the Covid-19 pandemic began to worsen globally.
Despite plummeting 26.5% between 05 March and 23 March – triggered by panic selling on the markets, the stock was able to quickly rebound the following month, as Pan had noted.
Between 02 April and 17 April, Venture’s share price spiked up 27.6% - overtaking the initial fall, even as Singapore implemented harsher travel and lockdown restrictions.
One big reason for this rally was the Singapore government’s third economic stimulus – called the Solidarity Budget, announced on 06 April. This had taken the total amount of coronavirus-financial aid to US$59.9 billion, at that point in time.
Over the next two days, Venture’s market capitalisation increased by some 13%.
Venture Corporation’s share price is currently up 28.6% from its trough in March.
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