Low valuations might spur more delistings, says OCBC

Valuations are at record lows.

With the Singapore market trading at extremely low valuations, OCBC Investment Research reckons that more cash-rich companies might decide to go private to take advantage of the current climate.

OCBC’s report said that risk-on sentiment appears to be strong in the market again, with the benchmark Straits times Index gaining more than 11% from its lowest point this year.

“While the market is likely to remain volatile due to the uncertain outlook, potential slowdown and job cuts, there are some positive silver linings from better market trading activities. The latter has improved; with average traded value per day in 2016 is up 9% from 2015’s level. In addition, there is also a gradual pick up in share buybacks and key shareholders’ buying activities. With current low valuations, this could also open up opportunities for more M&As and privatizations,” OCBC said.

Although the market's outlook has brightened, OCBC cautioned that risks still abound. The biggest concerns include worries about a hard landing in China, the fear of further job cuts, and a further slowdown in corporate activities, among others.