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SInkie retail sector will be hit badly by weakening foreigner consumer spending

Rogue Trader

Alfrescian (Inf)
Asset
RETAIL | Staff Reporter,
Singapore Published: 7 hours 25 min ago
Singapore consumer sector threatened by possible overseas slump

Shopping1_26_0.JPG

Consumer spending abroad could tank soon.

According to OCBC Investment Research, Singapore consumer firms are heavily reliant on overseas contributions, paricularly from Southeast Asia and China regions, to prop up their sales.


But "potential events" such as the removal of fuel subsidies in Indonesia and withdrawal of foreign direct invesment in the emerging Asia region in reaction to global equity losses could weaken overseas consumer spending, and really hurt Singapore consumer firms.

Here's more from OCBC:

SG Apr sales remain weak.
Singapore retail sales (excluding the heavily weighted motor vehicles component) fell 0.9% MoM (value) and 0.2% MoM (volume) for Apr as spending eased in categories such as petrol, department stores, clothing apparel and food and beverage. While part of the decline was due to lower fuel prices, Apr's figure was the fourth decline in five months. With May's figures likely to register another MoM slide (as with the past two years), the overall trend does not bode well for the consumer sector for 2QCY13. Even on a YoY basis, retail sales have reverted to a downward trend since the seasonal peak in Feb.


Overseas contributions face challenges.
For the majority of the SG consumer companies, reliance on overseas contributions (i.e. South-East Asia (SEA), China) is more significant vis-à-vis domestic sales, with the former being pretty resilient in the past quarters. However, potential events (e.g. removal of fuel subsidies in Indonesia, withdrawal of foreign direct investment from emerging Asia as a result of global equity losses) could have a detrimental impact on consumer spending. On the supply side, the influx of foreign competitors will also lead to margin reduction and higher advertising costs.


A muted 2QCY13?
As a recap, for the 1QCY13 corporate earnings season, consumer-related companies under the FTSE Straits Times Consumer Services Index (FSTCS Index) reported lower earnings per share figures in Singapore dollar terms than the street had anticipated (missed consensus projections by 25.4%) as higher operating expenses hurt margins. In our view, the 2QCY13 could exhibit the same trends as well, which would dampen enthusiasm for the sector.


Downgrade to UNDERWEIGHT; favour defensives.
The broad equity market correction has erased most of the YTD gains for the sector but we do not feel that an inflection point has been established yet. We downgrade the consumer sector to UNDERWEIGHT as the overhang of macro-uncertainty could see consumer spending fall more than expected. We favour counters with defensive qualities such as Sheng Siong [BUY; FV: S$0.82] or counters with potential M&A activity Viz Branz [BUY; FV: S$0.74].
 

ray_of_hope

Alfrescian
Loyal
Strange that the day this news appears the FJ Benjamin share price, which has been languishing, actually moves in the opposite direction to this news, i.e., +2c to 27c.

FJ Benjamin is heavily reliant on spending by foreigners.
 

The_Hypocrite

Alfrescian (Inf)
Asset
Wat a load of crock,, as if the FTs here are such big spenders like that,,

Those Ah Tiongs and Ah Nehs do alot of shopping here are?
 

Rogue Trader

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Asset
Wat a load of crock,, as if the FTs here are such big spenders like that,,

Those Ah Tiongs and Ah Nehs do alot of shopping here are?

Not FTs. most FTs live like sardines in rented hdb flats and majority of them are subjected to the same cost pressures as sinkies. The real spenders are tourists from Indon, China, middle east, russia etc.
 

Dark Knight

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Asset
Ah nehs are the big spender in Mustafa, little India.
Ah Tiongs are the big spender in China town.
Ah Pinoys are the big spender in Lucky Plaza.
Ah Myanmars are the big spender in Peninsula Plaza.

Wow .... Sillypore gahbrament think that we can really boost and sustain ours GDP growth based on all these foreigner's spending?
 

Rogue Trader

Alfrescian (Inf)
Asset
Wow .... Sillypore gahbrament think that we can really boost and sustain ours GDP growth based on all these foreigner's spending?

tourism is one of our main engines of the economy. when they raise VAT to 10% after 2016, singapore will be less attractive to the shopper tourists. We are already facing big competition from Hong kong.
 

chupacabra

Alfrescian
Loyal
How can a maid, construction worker, cleaner , cook, security guard all FTs spend alot of money earning peanuts. It's because of the shear number of them that spend on cheap stuff makes the numbers look good. But individually, even a sinkee teenager spends more money than any one of these FTs.

Midtown Orchard is dead on weekdays. Lots of shops in Somerset area are dead. Just running on fumes. Trying to make ends meet and riding out the 3 year lease.
 

The_Hypocrite

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Asset
My thoughts exactly. Good point,,but cant add yr points as Boss Sam dont allow,,,

How can a maid, construction worker, cleaner , cook, security guard all FTs spend alot of money earning peanuts. It's because of the shear number of them that spend on cheap stuff makes the numbers look good. But individually, even a sinkee teenager spends more money than any one of these FTs.

Midtown Orchard is dead on weekdays. Lots of shops in Somerset area are dead. Just running on fumes. Trying to make ends meet and riding out the 3 year lease.
 

congo9

Alfrescian
Loyal
Singapore's retail is basically dead. Things are overly priced. Dwinding disposable income is basically heap more coals to the ice. Rental are bascially too high. Only big boys can afford retail rental asked by landlord. That why you can only see only a few big brands colonising the retail shopping mall.

I am now in Malacca. I think it still much much better. They have different mix of tenant. One more thing, the things here are much cheaper and the quLity are as the same quality you find in Singapore.

Fyi, ijust bought 2 bermudas plus a pair of jeans for Rm100 only. Unbeatable pricing.
 

Cestbon

Alfrescian (Inf)
Asset
More and more shop and more and more shopping center. The retailer are targeting same small pool of population.
 
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