Equity valuations in Singapore have bottomed and a "sustained rebound" is under way as the market sights an "imminent V-shaped recovery in the global economy", Morgan Stanley Research noted yesterday.

Analysts Wilson Ng and Derek Chang said economies that have reopened have seen a swift resumption in production and consumer activity, boding well for Singapore, which entered phase two of its reopening last Friday.

"We could see inflows supported by a growing perception of Singapore as a safe haven amid geopolitical and economic uncertainties in the region."

They forecast a total potential return of 14 per cent for the MSCI Singapore Index for June next year, including a 5 per cent return from "high and defensible" dividends.

The analysts also said Singapore stocks offer investors the highest dividend yields in the Asia-Pacific region.

The 4.5 per cent yield levels represent a "substantial" 4 percentage point spread over the 10-year government bond yield, they added.

"MSCI Singapore dividend payout ratios have steadily grown over the past decade with the inclusion of more dividend stocks, which we believe offer relatively defensible dividends."

They favour the banking, property and consumer staples sectors and highlighted five stocks with "high and sustainable" dividends that were likely to benefit from incremental inflows - UOB, City Developments, Ascendas Reit, Wilmar and NetLink NBN Trust.

THE BUSINESS TIMES