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(Bloomberg) – Growing global optimism about coronavirus treatment is prompting a leading Singaporean analyst to take an optimistic view of small stocks hit by the pandemic in the city-state.
The news stream related to the development of a vaccine can place big bets on Covid losers, according to Jarick Seet, who was ranked by the Asiamoney Brokers Poll as Singapore’s top researcher for small-cap stocks in three of the last four years. . His top picks include staffing firm HRnetgroup Ltd., real estate developer Oxley Holdings Ltd., and event planner Unusual Ltd., which are down at least 21% this year and have a market capitalization of less than S $ 1. billion (US $ 735 million). every.
“Vaccine optimism may cause some smaller companies to generate exponential returns compared to large caps,” said Seet, director of small- and mid-cap research at RHB Securities. “Some money has already started to flow to sectors affected by Covid from stocks such as manufacturers of personal protective equipment.”
In recent weeks, promising updates from a number of companies in the race to develop a vaccine have encouraged some investors to shift to stocks tied to the global economic recovery and normal business operations. At the same time, Asian small-cap stocks have outperformed their larger peers this month, reducing some of the dominance of the latter during the first seven months of the year.
Seet said he also remains bullish on Singapore tech stocks.
“Semiconductor stocks will continue to rally as many of their clients look to upgrade their systems,” he said. Its top picks in the industry include Avi-Tech Electronics Ltd., UMS Holdings Ltd., and Frencken Group Ltd.
Meanwhile, shares of some companies linked to the pandemic that have soared this year appear to be losing steam. Medical apparel maker Medtecs International Corp. has fallen about 18% from its record earlier this month after jumping more than 4,500% for the year. Glove maker UG Healthcare Corp. is down about 34% from its all-time high.
That said, the pandemic is still spreading. Global cases have exceeded 24.4 million and several nations are battling a resurgence of infections, threatening a rebound in business activities. As for Singapore, the city-state is cautiously attempting to restart its economy after earlier entering a two-month lockdown designed to halt the spread of the virus. Gross domestic product contracted a record 13.2% year-on-year in the second quarter.
Officials have “quiet confidence” in the economic recovery through the end of the year, with fiscal stimulus helping to support domestic consumption and allowing businesses and workers to move into new industries, the commerce minister said on Friday. Industry, Chan Chun Sing, in an interview with Bloomberg Television. .
“The Covid-19 losers have already been punished a lot, while the winners have increased a lot,” Seet said. “The risk-reward is attractive.”
READ: Singapore stocks shine in Asia driven by US returns.
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