UBS investment strategists are downbeat on the overall outlook for the Singapore stock market in the second half of this year, as they expect a softening property market to drag down local shares.
Furthermore, the ongoing restructuring of the labour market will likely curb economic growth despite a global pick-up, said UBS' head of the Asia Pacific Investment Office, Ms Tan Min Lan, in a media briefing on Tuesday.
"Historically Singapore, because it is such a small and open economy, tends to have quite a nice bounce in growth when there's a cyclical recovery," she noted.
This year, however, UBS expects the economy to expand by just under 4 per cent - unchanged from last year, when gross domestic product (GDP) rose 3.9 per cent.
But the main drag on the local stock market this year will likely be property developers, "because if they are not churning volume then basically earnings drop", said Ms Tan.
The stock market has also traditionally had a close co-relation with the property market - when one weakens, the other will follow suit.
And UBS expects the property market to soften further in the years ahead, Ms Tan added.
"Our view has been that the real estate market will go through a multi-year period of decline. This is a function of incoming supply and very tight policies."
In the past three years, she noted, the average supply coming into the market was about 24,000 units a year. But between this year and 2016, this number will rise to about 55,000 units a year.
"Clients or private individuals who are over-invested in real estate really have to think about what they want to do in the coming three years or so," Ms Tan said.