Risks from a resurgence in Covid-19 cases and a possible tightening of measures both locally and abroad has not derailed RHB Group Research’s optimism on Singapore’s equity market.
“For 4Q2021, market outlook will continue to depend on how well stocks and sectors can contend with the current Covid-19 constrained growth [and] elevated inflation amidst supply chain disruptions, expectations of an early interest rate hike and corporate efforts to maximise operational efficiencies,” analyst Shekhar Jaiswal explains in an Oct 20 note.
He adds that Singapore continues to offer opportunities to accumulate stocks that leverage on an economic re-opening.
See: Singapore’s equity market gets a boost, new economy small and mid-cap stocks to benefit: Maybank Kim Eng
Counters that offer better earnings visibility either from business restructuring or structural and inorganic growth, look promising too, reckons Jaiswal.
For now, he has taken a liking for banks as well as the consumer, healthcare, industrial, telecom and transport sectors.
This is based on “expectations of a better 2022,” elaborates Jaiswal.
The analyst views Singapore’s economic reopening as an eventuality that will sustain over the next 12 months.
His comments came as the Covid-19 cases here are typically seen amongst patients are either asymptomatic or have mild symptoms.
The resultant simplification of testing protocols and the expansion of Vaccinated Travel Lanes (VTLs) to 11 countries are also steps closer to Singapore’s reopening.
Meanwhile, Jaiswal observes that market valuation is compelling again.
“While the Straits Times Index (STI) underperformed in 3Q2021 as investors awaited clarity on normalisation of business activities, the gradual addition of Sea (SE US, NR) into the MSCI Singapore Index has put a pause on the strong price performance for banks and the STI’s forward P/E of above +1SD – a level that the STI has struggled to sustain since Jan 2008,” he explains.
Jaiswal adds that the benchmark index – which is at 12.8x forward P/E – is trading below its historical average and remains the cheapest market in Asean.
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His target is that the STI will end the year at 3,420 points, down from his previous 3,410 point prediction. This is based on 14.0x forward P/E.
The STI closed at 3,198.08 points on Oct 20, down 0.93 or 0.03%.
Cover image: file photo
