Outlook on Straits Times Index

 The SGX Centre.

Mr Yeo Kee Yan, retail market strategist, DBS group research: "With bank loan growth finally turning positive in October after a year of contraction, regional Purchasing Managers' Indexes (PMIs) on the uptick, the Singapore Government offering financial aid to the beleaguered oil and gas sector, and oil and commodity prices heading for recovery, we are optimistic that the worst of the earnings cycle has passed.

"After two years of earnings contraction, we forecast growth of 8.7 per cent for 2017, a reversal from the 7.6 per cent contraction for last year. At 2,880 points, the valuation for the Straits Times Index (STI) is undemanding... We peg an STI objective of 3,150 by mid-year."

Ms Carmen Lee, head of OCBC investment research: "With a sustainable and still-healthy dividend yield of 3.8 per cent, which is higher than that for most of the regional markets, we believe valuations in the Singapore market, especially for STI stocks, are fairly attractive, especially for longer-term investors looking for sustainable dividend payouts.

"The recommendation is for a bottom-up stock-picking strategy, focusing on a diversified portfolio with core earnings and decent sustainable dividends."

Mr Sam Phoen, co-founder of investment-management firm Wateram Capital: "The STI traded above 3,000 points for three years between August 2012 and August 2015.

"It has since traded at mostly between 2,600 and 3,000, despite the rather overvalued S&P 500 in the United States hitting new highs from the second half of last year. A simple explanation is the poor economic growth of Singapore since the third quarter of last year.

"If economic growth is a key determinant of the STI's movement, then one should not be too bullish. Assuming that economists are right that we will have slightly higher growth of 1.5 per cent for this year, compared with 1.4 per cent for last year (Monetary Authority of Singapore quarterly survey in December last year), we can probably expect only a modest recovery in the STI.

"I expect positive momentum from US stocks early in Trump's term to give the STI a lift, to 3,000 points by end-June. Ultimately, the STI will still be determined by Singapore's own growth momentum, which remains lacklustre. As a result, I expect it to be around 3,050 by the year end.

"Given my relatively muted outlook for Singapore's growth, and uncertainties arising from a Trump administration, I prefer to invest in stocks that are defensive, offer good dividends, have diversified overseas revenue and are inexpensive (in terms of valuation), such as ComfortDelGro (target price: $3), CapitaLand ($3.40), Global Logistic Properties ($2.80) and Singtel ($4.25)."

A version of this article appeared in the print edition of The Sunday Times on January 01, 2017, with the headline 'Outlook on Straits Times Index'. Print Edition | Subscribe