At the time of writing this article, STI has tumbled 121 points, or 4.2% from an intraday high of 2,882 on 9 Jun 2016 to trade at 2,761 on 15 Jun 2016. With Brexit’s concerns hanging over the equity markets like a sword of Damocles, I believe it is apt to review which are the companies with significant exposure to UK.
According to a UOB Kayhian report dated today, Ascott Reit, City Development, CDL Hospitality, Comfort Delgro, Fraser Hospitality Trust, Ho Bee and SembCorp Industries were cited as companies with significant exposure to UK. (See Table 1 below)
Table 1: Companies with significant exposure to UK
Some of the aforementioned companies have already started to weaken amid Brexit concerns. For example, Comfort Delgro has dropped 4.7% from an intraday high of $2.76 on 9 Jun 2016 to $2.63 on 15 Jun 2016. Below is my personal compilation of the above companies vis-a-vis average analyst target prices and estimated dividend yield using Bloomberg data as of 14 Jun 2016 (See Table 2 below). Table 2 should serve as useful reference for those readers who wish to accumulate these stocks on weakness.
Table 2: Personal compilation with analyst target prices and dividend yield
What happens if there is Brexit?
It is very difficult to predict the consequences of a Brexit. Suffice to say that for the first 24 hours after the exit vote, market is likely to experience a sell off. According to a DBS Research report dated today, they postulated that STI should trade around 2,630 – 2,700 should a Brexit occur. This is still higher than the 2,530 levels which we experienced in early 2016.
As per my market outlook which I posted on last Sat (click here), I remain cautious on the overall market but positive on selected stocks. (My clients have, will & are informed on new stocks which I have entered and any significant portfolio change.)
In view of the above factors, I am unlikely to exceed 50% invested before Brexit, unless I spot some extremely attractive opportunities.
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P.S: Do note that as I am a full time remisier, I can change my equity allocation fast to capitalize on the markets’ movements.
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