Analyst
Analyst
Highlights
- The Fed could resume QT in 2027. We see QT with rate hikes as disruptive to the stock market but QT without rate hikes should be benign. We see QT in 2027 resembling QT2B, which is not accompanied by rate hikes.
- QT is positive for banks because it lifts bond yields and steepens the yield curve. Unfortunately, non-financial sectors tend to underperform due to the massive rally for banks. Stock-specific catalysts, such as business transformation and asset monetisation, are important, as can be seen from Keppel and Sembcorp Industries during QT2A and SingTel during QT2B.
- Our top picks for banks are OCBC (Target: S$31.60), followed by DBS (Target: S$76.85). We are positive on asset monetisation at Keppel (Target: S$13.23) and SingTel (Target: S$5.50). SATS (Target: S$5.00) benefits from the rising air cargo volume. We have selective picks for S-REITs and Technology: NTT DC REIT (Target: US$1.43), UI Boustead REIT (Target: S$1.17), Venture Corp (Target: S$20.65), Valuetronics (Target: S$1.88) and Riverstone (Target: S$1.10).
- Top picks with exposure to growth in AI: Keppel (integrated power business, 39 data centres with power capacity of 800MW and powerbank of 1,000MW and Bifrost Cable System), SingTel (GPU-as-a-Service, Nxera, STT GDC and NCS), NTT DC REIT (largest tenant specialises in autonomous driving and humanoid robots), Venture Corp (portfolio B benefits from demand for AI infrastructure) and Riverstone (cleanroom gloves).
What’s New
- New Fed Chair Kevin Warsh has established five independent taskforces covering: a) communications; b) economic data; c) balance sheet policy; d) productivity and jobs; and e) the Fed’s inflation framework, as part of a broad review of how the Fed conducts its monetary policy. The initiative reflects Warsh’s view that the US economy has changed significantly over the years, particularly with the emergence of AI, and evolving business dynamics. The Fed’s analytical tools and policy frameworks should be reassessed to ensure they remain fit for purpose. By bringing together leading academics, former central bankers, business executives, and technology experts, Warsh aims to obtain independent, evidence-based recommendations that can improve the Fed’s effectiveness, strengthen its decision-making processes, and better position it to achieve its dual mandate of price stability and maximum employment.
- C, D and F have the biggest impact on conduct of US monetary policy.
Highlights
- The Fed could resume QT in 2027. We see QT with rate hikes as disruptive to the stock market but QT without rate hikes should be benign. We see QT in 2027 resembling QT2B, which is not accompanied by rate hikes.
- QT is positive for banks because it lifts bond yields and steepens the yield curve. Unfortunately, non-financial sectors tend to underperform due to the massive rally for banks. Stock-specific catalysts, such as business transformation and asset monetisation, are important, as can be seen from Keppel and Sembcorp Industries during QT2A and SingTel during QT2B.
- Our top picks for banks are OCBC (Target: S$31.60), followed by DBS (Target: S$76.85). We are positive on asset monetisation at Keppel (Target: S$13.23) and SingTel (Target: S$5.50). SATS (Target: S$5.00) benefits from the rising air cargo volume. We have selective picks for S-REITs and Technology: NTT DC REIT (Target: US$1.43), UI Boustead REIT (Target: S$1.17), Venture Corp (Target: S$20.65), Valuetronics (Target: S$1.88) and Riverstone (Target: S$1.10).
- Top picks with exposure to growth in AI: Keppel (integrated power business, 39 data centres with power capacity of 800MW and powerbank of 1,000MW and Bifrost Cable System), SingTel (GPU-as-a-Service, Nxera, STT GDC and NCS), NTT DC REIT (largest tenant specialises in autonomous driving and humanoid robots), Venture Corp (portfolio B benefits from demand for AI infrastructure) and Riverstone (cleanroom gloves).
What’s New
- New Fed Chair Kevin Warsh has established five independent taskforces covering: a) communications; b) economic data; c) balance sheet policy; d) productivity and jobs; and e) the Fed’s inflation framework, as part of a broad review of how the Fed conducts its monetary policy. The initiative reflects Warsh’s view that the US economy has changed significantly over the years, particularly with the emergence of AI, and evolving business dynamics. The Fed’s analytical tools and policy frameworks should be reassessed to ensure they remain fit for purpose. By bringing together leading academics, former central bankers, business executives, and technology experts, Warsh aims to obtain independent, evidence-based recommendations that can improve the Fed’s effectiveness, strengthen its decision-making processes, and better position it to achieve its dual mandate of price stability and maximum employment.
- C, D and F have the biggest impact on conduct of US monetary policy.
Analyst
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at the following link: https://research-api.uobkayhian.com/assets/disclaimer/df64a6ea-7980-447c-ae9e-fd19b93257dc, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
