Oct 03, 2016

    Scared of Deutsche impact? Pick healthcare stocks

    MORE uncertainty hangs over global markets this week as Deutsche Bank's woes continue to spook investors, who will also keep a cautious eye on crucial United States jobs data due on Friday.

    Recent news that Deutsche Bank was hit by a whopping US$14 billion (S$19 billion) regulatory fine by US authorities has deepened the worry that the bank - already struggling to stay in the black - may tank without a German government bailout.

    "Yet there is rumour that, after the immigration policy backlash, (German Chancellor Angela) Merkel is facing a strong political pressure not to do so," KGI Fraser Securities trading strategist Nicholas Teo said.

    "Singapore banks and financial system will be relatively safe from any potential fallout but this whole Deutsche Bank thing may freak global markets out.

    "Some have already likened it to the second Lehman Brothers crisis in the making."

    US jobs data will be out this Friday. Last month, 171,000 new jobs were created, according to market estimate, up from 151,000 in August.

    A drop in August consumer spending suggested that an imminent Federal Reserve rate hike is hardly a foregone conclusion, just as investors brace themselves for US presidential elections next month - and the possibility of a highly unpredictable Trump presidency.

    Amid the uncertainty, the Straits Times Index still managed to eke out a 0.4 per cent gain last week. But as 2016 enters its last stretch, the volatility that has afflicted the market all year will likely remain the norm.

    For those with a limited risk appetite, experts suggest it may be worth considering taking position in safer sectors to ride out the choppy waters ahead. On this front, the healthcare sector again presents several enticing options.

    The SGX All Healthcare Index, which tracks 29 stocks in the sector, has put on some 13 per cent since February when the whole market languished in a 12-month low after the January crash.

    Several stocks have recorded strong price growth since the start of the year. For instance, hospital and clinic operator Raffles Medical Group has added around 12 per cent in the period to $1.53 at last close, while First Real Estate Investment Trust - which has a portfolio of medical facilities in Indonesia, Singapore and Korea - has surged some 19 per cent to $1.355.

    But the top thee performers have been specialist clinic operator Singapore Medical Group, women healthcare provider Singapore O&G and Health Management International, which runs private hospitals in Malaysia.