This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
While the accolade suggests that Singapore will keep its competitive edge, the country will need to brace itself for slower growth next year, as its one of the most open economies in the region.
In the Monetary Authority of Singapore bi-annual outlook released yesterday, it warned that demands for Asia’s exports may be dampened by the slower growth in advanced economies.
Property sector under pressure
The central bank also pointed out labour-intensive sectors will likely continue to struggle to cope with a manpower crunch. This puts the construction sector under the spotlight as it faces a potential double whammy with the slowing residential property market.
In a speech at an industry event yesterday, Singapore finance minister Tharman Shanmugaratnam pointed out home prices still had some way to drop further to achieve a meaningful correction especially after the sharp run-up in prices in recent years.
Besides sliding prices, the construction industry could also be looking at a slowdown in projects as well. Earlier this week, the government announced its intention to scale back the supply of public sector housing flats next year by 25% to avoid a glut. To put this into context, construction had been ramped up to tune over 25,000 Build-To-Order flats each year to meet a backlog of demands. While the cut will see the return to previous ‘norms’, the industry will still need some time to adjust to the slower growth.
In particular, construction stocks with significant exposure to government housing contracts will be under the spotlight, such as SGX-listed companies Chip Eng Seng and Tiong Seng.
On a weekly chart, Chip Eng Seng’s stock price is showing some signs of exhaustion on an uptrend.
The potential resistance level at around 90 cents is one to watch. If the stock price struggles to break through this and falls below the recent uptrend line, we could see the start of a downtrend.
There is also another possible scenario that it may push above the resistance level. In this case, we will be watching out to see if it makes a higher-high to suggest continuation of the uptrend, otherwise we may see a phase of consolidation.