SG Post-Budget 2023: Biggest Winners and Investment Opportunities

16 Feb 2023

By Danish Lim, Investment Analyst, Phillip Nova

In his speech during Budget 2023, Deputy Prime Minister (DPM) Lawrence Wong unveiled a $104.2B budget in 2023. DPM Wong noted that Singaporeans have to “brace themselves for a period of relatively higher inflation” and that he expects “headline inflation to remain high, at least for the first half of this year”. At the same time, he also added that “it is not fiscally sustainable to rely so heavily on Government support year after year to cope with inflation”.

DPM Wong stated that Singapore will need to “reposition our economy and refresh our social compact for the future” as the world enters an “era of zero-sum thinking”- with countries increasingly prioritizing economic nationalism and protectionism over mutual economic benefit. He highlighted a global recession, escalation of the Russia-Ukraine war, and a new COVID variant as potential downside scenarios.

We highlight 3 key themes in Budget 2023 that investors can look into for investment opportunities:

1. Household Support: Addressing the rising cost of living

In addition to the $8B support package previously pledged in 2022, Singaporeans will receive additional support to cope with inflation and cushion the impact of the GST rate hike. DPM Wong stated that the measures will help to “fully cover” the increases in spending for lower-income households. We highlight some key measures below:

Cost of Living (COL) Special Payment: Singaporeans aged 21 and above in 2023 will receive a one-off cash support between S$200 and S$400 in June 2023 based on their assessable income and property ownership.
COL Seniors’ Bonus: Eligible senior Singaporeans aged 55 and above to receive a one-off cash payment between $200 and $300 in June 2023. It is expected to benefit about 850,000 senior Singaporean citizens.
COL U-Save Special Payment: Depending on their HDB flat types, all eligible Singaporean households will receive double the amount of the regular GSTV- U-Save rebates in April, July, and October this year.
GST Assurance Package (AP): Topped-up by $3B. Cash payouts received every December for adult Singaporeans under AP will be increased by $300-$650 over the remaining periods of the package. This brings the total payout received between 2022 and 2026 to a range of $700-$2,250, depending on income and property ownership.
Enhanced GSTV Cash Payout: Cash quantum raised by $350 or $200, depending on the annual value of their property.
CDC Voucher: Singapore households will also receive another $300 worth of Community Development Council (CDC) vouchers in January 2024.

In our view, additional household support will drive local consumption and serve as a major boost for consumer-related stocks. This is especially important with the GST hike of 8% effective this year and 9% effective Jan 1 2024. We believe the above measures will help cushion the impact of inflation and the GST hike, leading to higher disposable income, and consequently, increased consumer spending. We favour Consumer Staples stocks as we expect people to rein in their discretionary spending and prioritize basic necessities instead:

Sheng Siong Group Ltd $1.62 (SGXT: OV8), -1.82% YTD, Operates a grocery chain across Singapore, eligible for GSTV use.
DFI Retail Group Holdings Ltd $3.24 (SGXT: D01), +10.58% YTD, Operates supermarkets (Cold Storage, Giant), convenience stores (7-Eleven), and drugstores.
QAF Ltd $0.86 (SGXT: Q01), +3.61% YTD, Manufactures and sells bakery, confectionary products, poulty, animal feed, milk, and dairy products.

2. Healthcare & Employment support: Care for an Aging Population & Creating Job Opportunities

The Energy Crisis showed: Budget 2023 also involved providing additional healthcare support for low-income individuals and seniors. Elderly care is of becoming more important given Singapore’s aging population. Some key measures include:

AP- MediSave top-ups: Singaporeans age 20 and below or 55 years and above will receive a $150 MediSave top-up every February from 2023 to 2025.
GSTV- MediSave: Top-up of $450 for Singaporeans aged 65 and above
ElderCare Fund and MediFund: Will be topped up by $500M and $1.5B respectively to help low-income seniors and individuals with medical expenses.

We believe these top-ups could serve as tailwind for healthcare-related stocks. We favour stocks with strong defensive characteristics (high Free Cash Flow yield). We also like companies that specialize in treating common elderly health issues such as cataracts, joint pains & arthritis/osteoporosis, as well as tooth decay:

Raffles Medical Group Ltd $1.46 (SGXT:BSL), +4.29% YTD, health care provider operating hospitals, clinics, imaging centres, and medical laboratories
Q & M Dental Group Singapore $0.35 (SGXT: QC7), +11.11% YTD, operates dental clinics
ISEC Healthcare Ltd $0.315 (SGXT: 40T), +0% YTD, provides eyecare (ophthalmology) services in Singapore and Malaysia.
Livingstone Health Holdings $0.072 (SGXT: PRH), -8.86% YTD, provides orthopaedic surgery, pain medicine, and other healthcare services

Employment support: The government also plans to create more job opportunities for Singaporeans, especially for senior workers. DPM Wong stated that “our best strategy to cope with inflation is to make ourselves more productive and competitive”. He also highlighted a need to “develop labour market intermediaries” that are able to “optimise training and job placement”. Key initiatives include:

Progressive Wage Credit Scheme: Topped up by $2.4B to co-fund up to 75% of pay increases for lower-wage workers.
Senior Employment Credit and Part-time Re-employment Grant: The 2 schemes were extended to provide wage offsets until 2025 for employers who hire senior workers; as well as encourage part-time re-employment or other flexible work arrangements for senior workers.

The support measures for elderly employment and push for upskilling should benefit stocks that have exposure to HR-related services:

HRnetgroup Ltd $0.84 (SGXT: CHZ), +7.01% YTD, Provides consultancy services, talent acquisition, soft skills development, and graduate training.

3. Banks: An overlooked beneficiary

In our view, the payouts, rebates, and scheme enhancements/extensions in Budget 2023 runs the risk of feeding into already persistent inflation. This could keep upward pressure on prices, causing the Monetary Authority of Singapore (MAS) to maintain a hawkish stance and keep interest rates higher than expected.

DPM Wong stated that despite encouraging signs of inflation softening, it is still “premature to declare victory”. He highlighted China’s reopening and higher commodity demand, as well as tight labour markets across the globe as possible factors adding to inflationary pressures.

Interestingly, he also pointed out that inflation may “stabilize at a higher trend globally” even after current inflation readings soften; attributing it to countries readjusting their supply chains and being willing to “accept lower efficiency and higher costs” so as to “prioritise diversification and strategic resilience”. We see this play out in US-China trade tensions where economic nationalism takes priority over mutual benefit.

Therefore, we could see a prolonged, high interest rate environment in Singapore. This should be beneficial for bank stocks as higher rates can help boost interest income and Net Interest Margins (NIMs):

Singapore Telecommunications Ltd $2.53 (SGXT: Z74), -1.56% YTD
Netlink NBN Trust $0.865 (SGXT: CJLU), +4.22% YTD
Starhub Ltd $1.05 (SGXT: CC3), +0.96% YTD

Receive SGD128 When You Open an Account Now!
Promotion valid from 1 Jan to 28 Feb 2023.

Trade Stocks, ETFs, Forex & Futures on Phillip Nova

Features of trading on Phillip Nova

Gain Access to Over 20 Global Exchanges
Capture opportunities from over 200 global futures from over 20 global exchanges

Trade Opportunities in Global Stocks
Over 11,000 Stocks and ETFs across Singapore, China, Hong Kong, Malaysia and US markets.

Over 90 Technical Indicators
View live charts and trade with ease with over 90 technical indicators available in the Phillip Nova platform

Trade Multiple Assets on Phillip Nova
You can trade Stocks, ETFs, Forex and Futures on a single ledger with Phillip Nova

Free Phillip Nova Demo Account

Fast and Secure Online Account Opening

An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

CFD is available for trading on Phillip MetaTrader 5 (MT5).

Features of trading CFD:

Trade in both the bull and the bear markets
The ability to enter a long and/or short position allow traders to take advantage of both rising and falling markets.
Smaller barrier to entry
Flexible and smaller contract sizes. This means that traders will be able to enter into a contract with a modest amount of capital.
No expiration date or risk of delivery
Unlike futures which commonly have a fixed expiration date, CFD allows traders to perpetually hold the position(s). CFD is cash settled, no need to worry about the delivery of the underlying asset.

Benefits of using Phillip MT5:

Trade at zero commission on a dynamic platform that offers low spreads. Integrated with Autochartist and Trading Central Indicators, and available on mobile, web and desktop app, you will never miss a trading opportunity with Phillip MT5.

Register for a FREE 30-day Phillip MetaTrader 5 Demo Account

More Market Trends

25 Nov 2024

By Priyanka Sachdeva, Senior Market Analyst for Phillip Nova Gold Market Snapshot Gold prices corrected sharply after a quiet weekend in the Russia-Ukraine conflict.

Client Portal