GIVEN their comparative sizes, the Straits Times Index (STI) stocks have again contributed the lion’s share to the broader Singapore stock market’s S$4.1 billion of net institutional outflow in the 2023 year, excluding the final two sessions of the year.

This comprised S$2.7 billion of net outflow in the first half of 2023 and S$1.4 billion of net outflow in the second half of 2023, as at Dec 27. Stocks that led the inflow and outflow tallies were typically those that maintained larger market capitalisation, in addition to daily turnover.

From a sector perspective, the trio of banks within the STI led the net institutional outflow in 2023 with S$2.6 billion of net institutional selling, followed by the Reit sector which booked close to S$1 billion in net institutional selling.

Together, DBS, OCBC and UOB accounted for 24 per cent of the total S$789 billion Singapore stock market capitalisation as at Dec 27, with the Reit sector taking up 12 per cent.

The impact of tighter financial conditions has been somewhat of an overarching driver for both the banks and Reits, impacting the former’s loan growth, and the latter’s financing costs.

At the same time, utilities, followed by consumer cyclicals, booked the most net institutional inflow. Within the STI, Venture, City Developments and UOB booked the highest net institutional outflow proportionate to respective stock market capitalisation, while Sembcorp booked the highest net institutional inflow proportionate to its respective stock market capitalisation.

The S$4.1 billion net institutional outflow over the period was the result of more than S$100 billion of total institutional buying and S$100 billion of total net institutional selling.

Regional fund-flow reports throughout 2023 suggested development market Asia-focused institutions pursuing assets under management (AUM) growth in 2023 were drawn to Japan, and to a lesser extent Australia, while India captured the emerging market spotlight.

For the broader Singapore stock market in 2023 through to Dec 27, for every eight stocks that booked net institutional outflow, seven stocks booked net inflow.

Stocks outside the 30 STI constituents that booked the highest net institutional outflow included four Reits and a business trust.

Suntec Reit led the non-STI contingent with S$177 million of net institutional outflow. Suntec Reit was in turn followed by Lendlease Commercial Reit, Keppel Infrastructure Trust, Prime US Reit, and Keppel Reit.

Meanwhile, ComfortDelGro was the stock outside the 30 STI constituents that booked the highest net institutional inflow for the 2023 year, ahead of the final two sessions of the year.

The global land transport operator was in turn followed by UMS, iFAST, Tianjin Pharmaceutical Da Ren Tang USD and Golden Agri-Resources. Of these five stocks, UMS’ net institutional inflow of S$59 million represented as much 6.7 per cent of its market capitalisation as at 27 Dec.

Suntec Reit

Suntec Reit has maintained that its portfolio financial performance remained resilient in 2023. For its Q3FY23 (ended Sep 30) gross revenue and net property income (NPI) grew 15.0 per cent and 9.7 per cent respectively from Q3FY22 with higher contributions from Suntec City Office, Suntec City Mall and Suntec Convention in Singapore, and The Minster Building in London.

However, the improvement in operations were eroded by higher financing costs, which saw the Q3FY23 distribution per unit (DPU) fall 14 per cent from Q3FY22. This followed DPU declining 27.7 per cent in H1FY23 from H1FY22.

Suntec Reit is a diversified Reit. Of its 5.7 million square feet of total net lettable area (NLA) interests that it held as at Jun 30, 4.4 million sq ft (77 per cent) was in office, with 1.0 million sq ft (18 per cent) in retail and 0.3 million sq ft (5 per cent) in the convention centre.

From a geographical diversification lens, the 5.7 million square feet NLA interests comprised 3.4 million sq ft (60 per cent) in Singapore, 1.7 million sq ft (30 per cent) in Australia and 0.6 million sq ft (10 per cent) in the United Kingdom.

Suntec Reit booked close to 80 per cent of its S$177 million net institutional outflow for the year in H1 2023.

The unit price of the Reit has moved from S$1.38 at the end of 2022, to S$1.29 at the end of H1 2023, before closing at S$1.07 on Nov 1, and partially rebounding to S$1.23 as at Dec 27. According to Refinitiv Data, the unit price is trading at a price-to-book ratio of 0.54x, versus its five-year average of 0.72x.

Since listing in December 2004, Suntec Reit has generated average annualised total returns of 7.6 per cent.

The gradually more dovish outlook for financing costs began on Nov 1, with the first of the two recent and comparatively more upbeat Federal Reserve Open Market Committee meetings.

Back in late October, the manager of Suntec Reit maintained that for its Singapore office portfolio, demand is expected to soften with rent growth slowing, while rent reversion will remain positive with revenue strengthening on the back of the past 21 consecutive quarters of positive rent reversions.

For Suntec City Mall, the Reit’s manager maintains that the recovery of meetings, incentives, conventions and exhibitions (Mice) events and the return of tourists will boost mall traffic and tenant sales.

The manager also expects that while growth in retail sales is likely to be moderated, overall tenant sales are expected to remain above pre-Covid levels.

Thus, it believes revenue from Suntec City Mall is expected to improve, underpinned by higher occupancy, rent and marcoms revenue, while events at Suntec Convention Centre will continue to drive and benefit from the country’s tourism recovery.

The manager also added that the convention business recovery is ahead of schedule and future growth will be driven by international, domestic and consumer events.

ComfortDelGro

ComfortDelGro reversed S$44 million of net institutional outflow in H1 2023 with S$131 million of net institutional inflow in the H2 2023 through to Dec 27.

Its Q3FY23 (ended Dec 30) revenue increased 3.8 per cent from Q3FY22, after its H1FY23 revenue increased 1.0 per cent from H1FY22.

At the same time its Q3FY23 profit after tax and minority interests (Patmi) was up 9.2 per cent from Q2FY23, with the Q2FY23 Patmi up 39.3 per cent from Q1FY23.

For the first nine months of 2023, Singapore operations contributed 58 per cent of ComfortDelGro’s revenue, while the United Kingdom accounted for 22 per cent, Australia 18 per cent, and China 2 per cent.

In line with the group’s strategic focus, ComfortDelGro has also introduced a new segmental reporting framework effective H1FY23, which comprises public transport, taxi & private hire vehicle (PHV), other private transport, inspection & testing services and other segments.

The group has maintained that Singapore taxi & PHVs revenues would grow with the introduction of Zig platform fees from July 2023 as demand for taxi and PHVs remains strong. Taxi revenues in China have also been observed to continue to recover after the relaxation of Covid-19 restrictions.

The company’s Q3FY23 business update also detailed that the UK public transport segment reported operating profit of S$6.1 million, which represented a turnaround from four consecutive quarters of losses.

Going forward, to sustain momentum, chief executive officer Cheng Siak Kian has maintained that the group is exploring new growth opportunities beyond its existing core business, particularly in the areas of electrification and autonomous vehicles.

The share price of ComfortDelGro has moved from S$1.23 at the end of 2022, to S$1.02 on Jun 7, before rebounding to S$1.38 on Dec 27. According to Refinitiv Data, the unit price is trading at a price-to-book ratio of 1.16x, versus its five-year average of 1.35x.

In summary, do note that when comparing flow and returns, investors must be mindful not to interpret net fund flow as stock performance indicators, just as much as past performance has no bearing on future returns of a stock. Fund flow simply indicates how investor genres such as institutions and retail investors are moving funds.

Inside Insights is a weekly column on The Business Times, read the original version.

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