5 Best Singapore Stocks to Buy for a Resilient Portfolio
December 8, 2022
The stock market has been on a downtrend recently as investors are bracing themselves for a volatile market in 2023. That’s due to rising interest rates, geopolitical risks and a potential recession.
While the US Federal Reserve (Fed) has signalled that it is likely to slow its interest rate hikes going forward, most of the top management in US banks have warned that the persistently high inflation could push the economy into a recession next year.
With so much uncertainty on the horizon, I thought it would be useful to look at some of the best defensive Singapore stocks that investors can accumulate in order to build a resilient portfolio.
1. Sheng Siong
One of the best defensive strategies in a recessionary environment would be the consumer staples sector.
I believe that fear of a recession will also prompt consumers to prioritise spending on essentials, like groceries, over discretionary spending.
Among the consumer staple stocks in Singapore, I believe Sheng Siong Group Ltd (SGX: OV8) is a good example due to its resilient business.
Sheng Siong is one of the largest retailers and supermarket chains in Singapore with 66 outlets currently.
During Sheng Siong’s Q3 FY2022’s earnings, gross margin continued to expand, rising to 29.4%, from 29% a year ago.
The rise was mainly due to an increase in sales mix of products with higher margins.
Sheng Siong ended the quarter with a net cash position of S$228.6 million and held no debt on its balance sheet.
While near-term headwinds will also affect Sheng Siong’s expansionary plans, its sturdy business model, resilient margins, clean balance sheet and consistent positive free cash flow, will all fit well into investors’ portfolios during a volatile market.
Net interest margin (NIM) expansion – amid the rising interest rate environment – will continue to be a key bright spot for Singapore banks.
However, with US Fed fund futures pricing in the peak of its policy rate at around 5% by the middle of 2023, further upward earnings revisions could be limited.
This means that sequential NIM expansion could slow as funding costs pick up.
Nonetheless, I believe that United Overseas Bank Ltd (SGX: U11), also known as UOB, will help investors to weather the volatile market, supported by the increase in its NIM.
Raffles Medical Group (SGX: BSL) is an integrated healthcare player that owns three hospitals in Singapore and China as well as a chain of clinics in Asia.
During Q3 FY2022, Raffles Medical Group reported an increase of 62.1% in its profit after tax, to S$38.3 million as compared to a year ago.
Meanwhile, revenue was up by 6.5% to S$199.5 million during the same period due to return of foreign patients seeking treatment. There was also an uptick in domestic patients returning for elective treatments.
While higher inflation and interest rates could dampen demand for high-end healthcare services, the ease in travel restrictions could boost the return of its patients seeking treatment at its Raffles Hospital, Raffles Medical and Raffles Dental branches.
In China, the recent easing of restrictions and the shift away from the COVID-zero policy will also be beneficial to Raffles Medical Group.
4. Thai Beverage
The year 2022 has been a good one for Thai Beverage Public Company Ltd (SGX: Y92), or simply known as ThaiBev.
ThaiBev is the largest beverage company in Thailand. It manufactures Chang Beer and other beverages.
It has a 28.4% associate stake in Singapore-listed Fraser & Neave Ltd (SGX: F99) (F&N), the maker of 100Plus and Fruit Tree juices.
In addition to that, it also holds stakes in SABECO, a leading beer producer in Vietnam, and Grand Royal Group, the largest whisky player in Myanmar.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.