If 2020 was a year of the downturn, then 2021 is the year for recovery.
Our Straits Times Index (SGX: ^STI), the barometer of the economy and a gauge of investor sentiment, has climbed by around 10.3% year to date.
With the wind on our back, should we expect more of the same from 2022?
Banks are still growing
Before we go on, let’s take a quick look at the composition of the STI.
The big three local banks, namely DBS Group (SGX: D05), OCBC Ltd (SGX: O39) and United Overseas Bank Ltd (SGX: U11), take up a whopping 43.7% of the index’s weight, as of 19 November 2021.
The good news is the banks have done extremely well this past year, and their performance looks set to carry on with impending rising interest rates and continued fund flows into the region.
DBS reported a record S$5.4 billion net profit for the first nine months of 2021 (9M2021) in its latest earnings report.
UOB chalked up record-high fee income for 9M2021 and reported sharply higher year on year net profit for the third quarter of this year (3Q2021).
And OCBC isn’t far behind with a net profit of S$1.22 billion for 3Q2021, up 19% year on year.
The three banks have tailwinds behind them that should see them continue to do well in 2022 amid a nascent economic recovery.
REITs continue to do well
There are currently seven REITs within the index that take up a combined 14.6% weight.
The three Mapletree REITs, namely Mapletree Industrial Trust (SGX: ME8U), Mapletree Logistics Trust (SGX: M44U) and Mapletree Commercial Trust (SGX: N2IU), have all reported higher year on year DPU for their fiscal 2022 first half.
Both Ascendas REIT (SGX: A17U) and CapitaLand Integrated Commercial Trust (SGX: C38U) have announced acquisitions recently that will bump up their DPU.
Unit prices normally trend up in tandem with rising DPU.
Industrial and commercial REIT Frasers Logistics & Commercial Trust (SGX: BUOU) has reported high occupancy of 96.2% for its portfolio of 103 properties with DPU rising by 7.9% year on year for its latest fiscal 2021.
And let’s not forget Keppel DC REIT (SGX: AJBU) which is enjoying its time in the sun as its portfolio of data centre assets is in a sweet spot to grow with the surge in online activity.
It looks like smooth sailing ahead for the seven REITs with most, if not all, expected to report higher DPU for 2022.
Strategic reviews galore
Change is also afoot as many of Singapore’s bellwether blue-chip companies undergo strategic reviews and transformations.
Singtel announced its strategic review back in May where CEO Yuen Kuan Moon mentioned realigning the business for growth even as the telco impaired two US-based businesses.
Offshore and marine conglomerate Keppel Corporation Limited (SGX: BN4) is prepared to pivot away from capital intensive rig-building to pursue an asset-light business model.
Real estate giant CapitaLand Group has successfully split itself up into two — a listed investment division called CapitaLand Investment (SGX: 9CI) and a now-privatised CapitaLand Development.
And engineering specialist Singapore Technologies Engineering (SGX: S63) has charted out its five-year growth plan even as the group reports a record-high order book.
These companies are positioning themselves well for their next lap of growth, which bodes well for the index in the future.
Get Smart: Let the good times roll!
Even Singapore Airlines Limited (SGX: C6L) and SATS Ltd (SGX: S58) are enjoying a breath of fresh air as borders reopen and air travel restarts.
The quick analysis above shows that the STI still has room for growth next year as a wide swath of companies continues to do well.
The better times are here, and if you are interested in starting to invest, there are few better times to start than today.
This is your chance to tap into David Kuo’s decades-long experience in one sitting! We have released a Special Free Report that outlines his strategies for 2022 and beyond. If you’re looking into dividend stocks next year, then this FREE report will be invaluable to your success. Click here to download now.
Disclaimer: Royston Yang owns shares of DBS Group, Mapletree Industrial Trust, Frasers Logistics & Commercial Trust and Keppel DC REIT.