SINGAPORE (Oct 3): Daiwa sees two tracks developing on the Singapore stock market.
One has developers and companies while the other has stocks exposed to domestic demand, tech disruption and government policy on the other.
Daiwa says investors should take advantage of divergent outlooks within the sectors as upside to the STI remains limited.
The research house has a new STI target of 3,285 for mid 2018 based on 13.1 times 15-year average forward earnings.
In a Monday report, analyst Ramakrishna Maruvada picks banks for their above-market earnings growth potential due to the prospect of Fed rate hikes, property developers which is seeing prices recover amid improving demand, exporter stocks and corporate restructuring and M&A plays with robust fundamentals.
On the other hand, the analyst says investors should avoid telecoms, supermarket operators, land transport and the power sector as mid-2018 market liberalisation would only compound sector woes.
Sector-wise, Maruvada has upgraded property developers to “overweight” as it believes residential property prices have bottomed after four years of soft-landing.
He is also downgrading consumer services to underweight, reflecting poor outlook for its constituent stocks.
Meanwhile, the analyst remains overweight the banks, underweight the telecoms and oil & gas sectors, and neutral on consumer goods and industrials.
Daiwa’s revised top index picks are DBS, UOB, City Developments, CapitaLand, ST Engineering, SATS and Wilmar.
Its revised out-of-index picks are Raffles Medical, Accordia Golf Trust, Starhill Global REIT, Frasers Centerpoint Trust and SIA Engineering.
