STI Market Update

STI should grind higher towards the next near-term resistance at 3310, followed possibly by 3428 to 3470 subsequently. Short-term, buy near 3150; sell near 3310. Upside bias to the next resistance level at 3310 before a pullback to test the rising trend line and 15-day moving average support at 3150 to 3200.

The McClellan Oscillator should trend higher towards the overbought level near 50 as the STI heads for 3310 and ease back, in line with STI behaviour. If the STI rises above 3310 subsequently, the next level is 3428 to 3470.

DBS Research sees the USD strengthening from 1.36 currently to 1.39 during 2Q to 3Q. This is positive for shipping trusts Rickmers Maritime, Pacific Shipping Trust and First Ship Lease given their USD-based cashflows and attractive yield. DBS Research has Buy recommendations for Rickmers Maritime (S$1.07; TP: S$1.80; FY08 yield: 11.3%) and Pacific Shipping Trust (US$0.45; TP: US$0.52; FY08 yield: 10.5%). No rating for First Ship Lease (S$1.06; FY08 yield: 13.9%, based on consensus). From a technical prospective, we like Rickmers Maritime and see a trading objective of $1.24. Buy at $1.05 support or slightly above.

The Master Plan, to be exhibited in its draft form in late May this year as part of a review every 5 years, is the statutory land use plan aimed to assist in guiding the physical development of Singapore in the medium-term over the next 10 to 15 years.

We have identified the Property sector as a key and obvious beneficiary.

Stronger planning initiatives and an improved sense of fundamentals will bring foreign investment into Singapore, directly benefiting developers over time.

Our top picks in the sector are City Dev (BUY, TP S$12.81), CapitaLand (BUY, TP S$7.50), Fraser and Neave (BUY, TP S$5.85) and Allgreen (BUY, S$1.66). Among the S-Reits, we favour CMT (BUY, TP S$3.93) and Suntec REIT (BUY, TP S$1.98) for their exposure to the resilient retail sector.

We also continue to like CCT (BUY, TP S$2.93) for its strong organic growth with positive rental reversions likely up to 2010; and CDL HT (BUY, TP S$2.90) for its exposure to the booming hotel sector.

Apart from the Property sector, also standing to benefit from this strategic outline are the Hotel, Aerospace, Healthcare, Transport and Construction sectors. Within the construction sector, we prefer the building material suppliers like Hong Leong Asia (BUY, S$4.30) and Pan-United Corp (BUY, TP S$1.16). For the healthcare and transport sectors, likely long-term beneficiaries would include Raffles Medical (BUY, TP S$1.74), Parkway Life REIT (BUY, TP S$1.50), SMRT (BUY, TP S$2.00) and ComfortDelgro (BUY, TP S$2.15).