Post-crisis trough is near, says analyst.
According to CIMB, as the twin threats of the fragile emerging markets’ growth and rising interest rates hammer the global equity markets, the mitigation factors for Singapore are 1) the market valuations are undemanding; 2) the companies’ balance sheets have little gearing; 3) the bulk of the local consumers are not overstretched; and 4) the banks have large capital buffers.
FSSTI’s P/BV valuations have reached their post-crisis 2011 troughs; this lends greater comfort than the P/E valuations reaching their troughs.
We think Singapore is a useful place to hide, though one has to careful and avoid the emerging markets’ proxies and highly-geared companies.
The lack of leverage and earnings resilience are the main attractions today, not just the absolute dividend yields. The ability to deliver earnings is important.
The 2Q results season that just ended had five disappointments for every three positive surprises. The stocks which failed to meet the 2Q earnings expectations were swiftly sold down after the results. Our end-13 FSSTI target is 3,400, based on a bottom-up methodology.
Our top picks are CAPL, DBS, EZI, FR, KEP, M1, OEL, SUN, THBEV and UOL.
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