Singapore market to offer stability amidst global volatility in 2023: OCBC & More Trending News

 

Heading right into a 12 months of nice uncertainty for the global market, OCBC Investment Research strategist Carmen Lee says that it could be “prudent” for traders to have some publicity to the unexciting however steady Singapore market.

In her technique report dated Jan 18, Lee says that though missing “excitement” is a typical cost levied on the Singapore market, there may be nonetheless worth to be discovered particularly in a macroenvironment of persistently elevated inflation and excessive rates of interest.

According to her, Singapore is “stable, not boring”, and can function a great diversifier because it provides a steady group of core worth shares which can assist to scale back the general volatility of any fairness portfolios.

Last 12 months, the Straits Times Index (STI) ended the 12 months with a acquire of 4.1%. With a dividend yield of 4.1%, which means that the entire return for the 12 months was 8.2%. “This is remarkable especially in view of the massive losses for equities and bonds globally in 2022. Additionally, global equities saw huge fluctuations within the year. Based on the MSCI World Index, global equities shed almost 29.0% from 2022’s high to 2022’s low, before recovering with a gain of 12.4% from the 2022 low to close the year still in negative territory,” says Lee.

She notes that the STI noticed a narrower buying and selling vary, shedding 14% from its 2022 excessive earlier than including 9.5% from its 2022 low to shut the 12 months in optimistic territory.

Says Lee: “Continuing last year’s strong performance, the STI started the year on a slightly positive note, largely buoyed by optimism surrounding China’s reopening which is widely expected to benefit this region.”

See additionally: Singapore’s FSSTI sees rebound regardless of extension in home restrictions

“With the reopening and the return of Chinese tourists, this will help to boost revenues for tourism-related industries, including hotels, F&B outlets, leisure, gaming, entertainment, retail and other consumer-related products and services. Airlines and transport companies are also likely to benefit from the higher inflow of visitors to the country,” she provides.

She believes that whereas headwinds stay, tailwinds are starting to emerge. Year-to-date, the STI is up 3.42% as of Jan 26. With the cautious global outlook forward, the P/E valuation for the STI is now at virtually a 2-year low regardless of some tailwinds from China’s re-opening, notes Lee.

Current valuations are at 11.1x price-to-earnings ratio (P/E), 1.1x price-to-book worth (P/Bv) and with an estimated dividend yield of 5.1% for the STI. “These are undemanding and we believe it has also priced in some pessimism about the global outlook in 2023,” she provides.

See additionally: STI down 0.72% regardless of December NODX growth

With these valuations, Lee sees core Singapore blue chip shares providing steady earnings development in 2023. Some of her Singapore “focus ideas” embrace CapitaLand Ascendas REIT (CLAR), CapitaLand Ascott Trust (CLAS), ComfortDelGro (CDG), DBS Group Holdings, Frasers Logistics & Commercial Trust (FLCT), Frasers Centrepoint Trust (FCT), Keppel Corp, Mapletree Industrial Trust (MIT), Netlink NBN Trust, Singapore Technologies Engineering (ST Engineering), Singapore Telecommunications (SingTel), Thai Beverage (ThaiBev), United Overseas Bank (UOB), UOL Group and Venture Corp.

However, Lee additionally believes that a part of the reopening optimism has already been priced in for shares. For instance, CLAS, which owns resorts, serviced residences and different hospitality property, hit a current low of 87 cents in October 2022. Since then, it has recovered about 25% to shut at $1.08 as of Jan 25.

Similarly, Singapore Airlines (SIA) has additionally posted a robust restoration from the current low in October 2022, when it fell to a low of $4.99. Recent reopening optimism has buoyed sentiment for the inventory, which closed at $5.98 on Jan 25.

Meanwhile, she is of the view that Singapore’s earnings cuts in 2023 might be modest, if any, in contrast to different markets, largely due to the help from the development in earnings from the banking sector.

As at 12.56pm, the STI was buying and selling 14.47 factors or 0.43% up at 3,367.24.

Singapore market to offer stability amidst global volatility in 2023: OCBC

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Singapore market to offer stability amidst global volatility in 2023: OCBC

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