Re-iterating our conviction picks
The FSSTI did well in December and early January. Asian markets in
general, have ignored December’s S&P500 fiscal cliff jitters but have
joined in the ‘fiscal-cliff-relief’ Capricorn rally. China has led the way.
Our Singapore downgrade in November was a relative call.
As fears of a hard landing for China
recede, we had advocated that
investors step out of their ‘yield’
comfort zone and stretch for growth.
We had felt Singapore would lag
because it lacked growth, hence the
downgrade. Our bottom-up
end-2013 FSSTI target (3,316)
remains, implying target 13.2x CY14
P/E. Singapore is rated Neutral.
In our 2013 outlook, we felt a more
bullish environment was plausible
and thought that Singapore could lag
as it is not associated with growth.
1) a non-consensus
downgrade of REITs, in favour of
2) a Commodities
The FSSTI rallied ahead in
Dec-Jan and is now merely 3% below
its 4Q09 high (3,314).
| STI last 6 months chart
|| STI Historical Chart
For the past
six weeks, stocks geared to the China
recovery theme (Capitaland family,
Jardine family) has done well. Even
gaming has done well on strong
Macau data points and hopes that
the Chinese gambler will revive. Else,
tier-2 property stocks have rallied in
December on privatisation hopes.
Second-tier O&M plays have joined
the rally and commodity traders and
processors have soared from low
What We Think
We think the China-led rally for
Asian markets can still go on. There
is little reason to doubt that the
FSSTI cannot surpass that post-GFC
high, now that financial markets look
unlikely to break down in a big way.
Markets will probably be jittery in
February when the US debt ceiling
talks come into fore. Once that is
settled, slowdown concerns are more
long-dated and less disconcerting.
What You Should Do
Our top picks are intact.
maintain that investors should
stretch for growth and not hide in
no-growth yields. For mega-funds,
our top three large-cap proxies are
Capitaland, DBS and Wilmar. For
investors less constrained by
liquidity, our conviction picks are
UOL, Tat Hong, CWT. (Read Report)
Source : CIMB Research
STI up; reiterating BUYs for our 2013 stock picks
You would be interested to find out....
• OIR stock picks 2013 have outperformed
• Feb is likely to be a quiet month
Labels: CapitaLand, CWT, Equity Strategy, UOL Group