Air travel has seen a sharp rebound as countries reopen their borders, with passengers on both Singapore Airlines Limited (SGX: C6L) and Scoot soaring by 85.5% year on year to 2.7 million passengers in April.
Moving forward, however, the pace of recovery looks set to slow as base effects kick in since quarantine-free travel resumed on 1 April last year.
Economists are now warning that Singapore faces a high risk of a technical recession, defined as two consecutive quarters of negative GDP growth.
The first quarter of 2023 had already seen the economy decline 0.4% compared to the previous quarter, and the last time Singapore faced a technical recession was back in the second quarter of 2020.
It is natural to feel worried about your investment portfolio as an economic slowdown looms.
Blue-chip stocks can help to buffer your portfolio from the storm as these businesses have a track record of going through good times and bad.
Plus, most of them also pay a dividend to boot, so you can enjoy a passive stream of income while waiting for the eventual recovery.
Here are three dependable blue-chip stocks that can keep your portfolio safe during the storm.
Hongkong Land Holdings Limited (SGX: H78)
Hongkong Land Holdings, or HKL, is a property investment, development and management group that owns and manages more than 850,000 square metres of prime office and luxury retail space.
These assets are located in Singapore, Hong Kong, Beijing, and Jakarta.
HKL released an encouraging business update for its fiscal 2023’s first quarter (1Q 2023).
In Hong Kong, improved sentiment came about as travel restrictions were lifted and the local economy recovered.
Leasing activity within the country has also improved as the number of enquiries has increased both on a year-on-year and quarter-on-quarter basis.
Both tenant sales and footfall at HKL’s CENTRAL series luxury malls in Beijing and Macau also enjoyed a strong recovery as pandemic restrictions were lifted.
For Singapore, rental reversions were positive with physical vacancy dropping to 4.6% as of 31 March 2023 compared with 7.5% three months ago.
Moreover, sales activity for the group’s development properties in China has also picked up with planned sales completion for this year expected to be higher than for 2022.
As a mark of its resilience, HKL maintained its annual dividend of US$0.22 for 2022 despite underlying net profit falling by 20% year on year.
Management has ambitious plans for the future and plans to open 10 retail developments within the next five years in seven cities in China.
These new developments will add 280,000 square metres of retail floor space to its China portfolio, and the group is also targeting to complete its S$8 billion West Bund Financial Hub development in Shanghai in three phases by 2027.
CapitaLand Investment Limited (SGX: 9CI)
CapitaLand Investment Limited, or CLI, is a global real estate investment manager with S$133 billion of assets under management (AUM) and S$89 billion of funds under management (FUM) as of 31 March 2023.
The group released a commendable set of earnings for 1Q 2023 as it continued to grow its fee-related earnings (FRE).
CLI has ambitious plans to grow its FUM to S$100 billion by next year and to increase its lodging management division’s FRE to more than S$500 million by 2028.
The group generates a resilient stream of recurring FRE that makes up 85% of its total 1Q 2023 fund management FRE.
In addition, its private funds are also witnessing steady growth with total capital raised of S$1.7 billion and total investments of S$1.2 billion as of 29 May 2023.
Its lodging management division also looks poised to do well as China’s reopening represents a tailwind for global travel, leading to higher revenue per available room and occupancy rates.
Singapore Technologies Engineering (SGX: S63)
Singapore Technologies Engineering, or STE, is a technology, engineering and defence group that serves the aerospace, smart city, and defence sectors with customers spanning more than 100 countries.
Its recent 1Q 2023 business update showcases the group’s resilience as revenue rose 13% year on year to S$2.3 billion.
Excluding its US Marine division which was divested last year, revenue would have risen year on year across all its three segments.
More growth is expected for its Commercial Aerospace division as air travel continues to steady recovery, with the reopening of China acting as a key catalyst for the group.
The defence and public security segment also expects revenue to pick up in the next few quarters as it secured S$3.3 billion of new contracts in 1Q 2023.
STE’s order book remains robust with S$25.4 billion in contracts as of 31 March 2023.
Just last month, the engineering group also set up an airframe MRO joint venture (JV) with SG Airlines in Hubei, China.
The JV company will operate a greenfield airframe MRO facility to provide maintenance, repair and overhaul (MRO) services to cargo and passenger airlines.
The first hangar facility is estimated to be operational by 2025.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
