OCBC Investment Research (OIR) strategist Carmen Lee says investors should hold a portfolio of growth and cyclical stocks amid the current short-term volatility.
There is, however, growing optimism that the economy is poised to re-open with the easing of restrictions and the resumption of more activities.
On Aug 6, the multi-ministry taskforce (MTF) announced that Singapore will be allowing gatherings of up to five fully vaccinated people in the country, with dining-in only for the fully vaccinated from Aug 10 onwards.
On the same day, the republic will relax its travel restrictions and allow entry approvals for vaccinated work pass holders.
According to Lee in an Aug 10 report, the current market valuation of 12.9 times is “not excessive” compared to the historical average of 13.3 times.
This is especially in anticipation of the strong pick-up in earnings expected for the FY2021 and FY2022.
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“Earnings growth is estimated at an average 14.2% in 2021 and 11.1% in 2022. In terms of price-to-book ratio, the Straits Times Index (STI) is currently trading at 1.1 times, which is also below the 10-year historical average of 1.21 times,” Lee writes.
“Despite [the] recent market rout [arising from the regulatory uncertainties in China], the Singapore market has been resilient and was relatively unscathed by recent sell-down in the region – placing the STI as among the better performers in July and year-to-date (y-t-d),” she adds.
The STI is also among the markets with double-digit gains at +11.6% y-o-y as at Aug 6.
To this end, Lee has identified several of her top picks among the counters on the SGX.
Within the Singapore REITs (S-REITs), Ascendas REIT (A-REIT), CapitaLand Integrated Commercial Trust (CICT), Keppel DC REIT and Mapletree Industrial Trust (MINT).
The banks, DBS Group Holdings and United Overseas Bank (UOB), as well as the telcos Singapore Telecommunications (Singtel) and Netlink NBN Trust are also included.
Rounding up the rest of Lee’s top picks are ComfortDelGro, Keppel Corporation, SATS, Sembcorp Industries, Thai Beverage, UOL Group, Venture Corporation and Wilmar International.
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As at 12.47pm, the STI is trading 21.73 points lower or 0.7% down at 3,185.63.
Photo: Albert Chua/The Edge Singapore
