OCBC Securities: Constructive, nation-building advice

With a GE around the corner, here’s what OCBC Securities says

Singapore: Providing decent total returns 

In recent months, it has become increasingly challenging to navigate the changing investment landscape, especially for a small open economy like Singapore. With the sizzling hot Generative artificial intelligence (AI) persistently dominating as an investment theme and the “higher for longer” rate environment, can Singapore companies identify their own niches and ride out these challenges? Is Singapore still able to attract investments? The benchmark Straits Times Index (STI) has posted gains of 2.3% so far in the year and together with an estimated dividend yield of 5.8%, the total return is a decent 8.0% versus -2.9% to +30.1% for the rest of the region. Singapore remains an attractive market, especially for the ease of doing business. With rising geopolitical risks elsewhere in the world, this region being comparatively more stable will continue to attract companies. In terms of valuations, Singapore is inexpensive.  Aside from dividend yield, the STI is trading at 10.5x FY24 price-to-earnings (P/E) and 10.2x FY25 P/E. Earnings growth is projected at the single-digit level for this year and next, but this is decent for a stable economy. In terms of price-to-book (P/B), it is trading at 1.1x P/B – and this is also at the lower end versus regional peers and below historical 10-year average. We hold an Overweight position on the Singapore market. Our preferred picks include banking, tourism related, domestically focused and certain industrial stocks. (Carmen Lee)