There’s very slow growth and the fear of deflation in the US, inflation in China, a financial crisis in the Eurozone, tension in Korea and Christmas hols around the corner, so you think that markets will take a pause at the very least.
But local broker Kim Eng thinks not. It sent out a note on Wednesday morning saying: Feeling hot, hot hot! – There have been concerns that the recent rise in Asian bourses has been fuelled by “hot money” coming out of the US on the back of higher liquidity from the Federal Reserve’s quantitative easing measures. With more money flowing into the system, fund managers are looking to piggyback on Asia’s fundamental growth story and local currency appreciation against the greenback as a hedge against the weaker US dollar and inflation. The obvious investment candidates for this “blind money” are Singapore’s blue chips, which offer sound fundamentals and rock-solid balance sheets. A further subplot within this context is the likelihood of funds moving out of Hong Kong and China to be invested into the Singapore property market after recent moves by the Hong Kong government to cool its property market and the possibility of China doing the same for its own. Transaction statistics also are pointing to a larger proportion of China buyers for Singapore properties. The government said it is continuing to monitor the property market and further measures will be taken where necessary if it deems a bubble is forming. For now, we believe that the recent pullback is an excellent entry opportunity to ride this wave of cash. City Developments, in particular, stands out, as it is often identified as the bellwether of the Singapore property market and is looking attractive following its recent pullback.
It’s other stock picks are Keppel Corp, Neptune Orient Lines, Sembcorp Marine, SingTel and UOB. Well you can’t go very wrong with these which include four TLCS even if market collapses. They all got cash and strong balance sheets. And other than the City Dev and UOB, very little borrowings. And UOB and City Dev are conservatively run by the standards of their peers in banking and property dev respectively.