In a report issued by Nomura a few days ago, it said it saw a 10 to 15% market returns in Singapore in 2011. The drivers will be a strong currency, attractive-looking valuations and “the persistence of negative real interest rates”.
“As one of the few countries in Asia unlikely to impose capital controls, the Singapore market is poised to benefit from the easier global liquidity environment in 2011 against the backdrop of what look to be attractive valuations (14x P/E, 11 per cent market earnings per share growth and dividend yield of 3 per cent)”
US quantitative easing (inflating or stimulating the economy by increasing money supply or cutting taxes) – will be a key re-rating driver in 2011. This will benefit the banks, commodities and commodity-related sectors as well as the commercial property segment.
Banks will continue to be re-rated upwards driven by regional growth and steady net interest margins in 2011. The “buys” are OCBC and DBS.
“We are positive about upstream commodity plays like Golden Agri and Indofood Agri on rising CPO (crude palm oil) prices … like Noble for its upstream coal assets and increasing contribution from its midstream investments.”
The offshore marine sector is expected to enjoy an upswing in rig upgrading/build cycle, on the back of stronger oilprice outlook (US$95 per barrel forecast for 2011) and start of a new rig upgrading cycle that is driven by regulation. Keppel Corp and Sembcorp Marine will likely be re-rated upwards next year.
Investors in property stocks should stick to the office segment that is likely to benefit from cyclical recovery, continued low interest rates and liquidity inflows. K-Reit, CapitaCommercial Trust and Suntec Reit are favourites.
As to residentials, concerns abt more policy measures to”cool” the market could undermine share price performance of the developers. A polite way of steering investors away from this sector.