USD to SGD rising, Singtel drops to 6-month low amid 5G launch
Strong US market data boosted the USD/SGD, but had little impact on blue-chip stocks like Singtel.
- USD gaining on the SGD on the back of improved manufacturing data
- Singtel share price falls to S$2.27 despite launching 5G network on Tuesday
Why is the USD/SGD rising?
The USD/SGD is starting to increase again, after two straight weeks of decline.
The forex pair gained nearly five pips, or 0.5%, in the last 24 hours. As at 15:40 SGT on Wednesday 02 September 2020, the USD to SGD rate stands at S$1.36237.
This latest rally has come on the back of a strengthening US Dollar, thanks to better-than-expected US ISM manufacturing data for the month of August 2020.
IG market strategist Pan Jingyi said the greenback’s improved performance is also despite US Federal Reserve Governor Lael Brainard’s dovish comments earlier.
‘With the recovery likely to face (virus)-related headwinds for some time, in coming months it will be important for monetary policy to pivot from stabilization to accommodation,’ Brainard said in a speech on Tuesday 01 September 2020.
Despite the uptrend, Pan noted that the downtrend, alongside a bearish bias, remains intact at present for the US dollar. ‘This is with the latest Fed-led outlook and recovery progress noted,’ she added.
The US Dollar Index – a gauge of the US dollar’s strength relative to other select foreign currencies – hit a 2.5-year low of 91.77 at the start of this week. It has since rebounded slightly to 92.60.
Looking ahead into the near term, Pan wrote: ‘Some pause here before the USD index retest the 92.00 level should not be ruled out. Resistance (can be) seen at the 93.00 level.’
Putting the focus back on the USD/SGD, UOB analysts wrote that ‘downward momentum has not improved by much’, with a break of 1.36550 on the upside indicating that ‘current downward pressure has eased’.
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Why did Singtel’s share price drop to a 6-month low?
Singtel's (SGX: Z74) share price continues to face strong resistance at the S$2.30 level, despite the launch of its 5G network on Tuesday 01 September 2020.
Shares were trading along the S$2.29 mark for the most part of Wednesday, and even touched S$2.27 on Tuesday morning – the lowest price seen since 23 March 2020.
As part of its 5G non-standalone (NSA) network launch, Singtel said it would be introducing a three-month trial for consumer and enterprise customers.
Singtel’s 5G NSA network, which can deliver 5G speeds of more than 1Gbps, will cover the Harbourfront, Bugis and Dhoby Ghaut districts for a start.
Nevertheless, bearish sentiments on the Singtel stock remain strong, two weeks after the company reported a 24% decline in earnings for the June-ending quarter.
Read more: Top 5 Singapore stocks to buy in September 2020
Despite the present share price weakness, top investment analysts still envision significant upsides for the stock in the next 12 months.
Singtel currently has a 12-month consensus share price target of S$3.06, alongside an average rating of ‘buy’ – based on a Bloomberg poll of 17 brokers.
The price target represents an upside of roughly 33% from the last traded price.
Equity analysts from Morningstar Research even called the Singtel stock a ‘dividend play’, putting their base full-year dividend case at S$0.09 – equating to a dividend yield of 3.9%.
IG’s client analysis shows that ‘buys’ form 67% of all trades on the Singtel counter today across the week so far.
Additionally, 95% of client accounts also currently hold ‘buy’ (long) positions on the stock, indicating an expectation for Singtel’s share price to rise in the future.
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