Singapore equities should be able to withstand more volatility even if the global economy worsens, going by the results of a series of stress tests conducted on Asian firms.
They found that Singapore ultimately remains "a market that rewards stock-picking", although some sectors will likely still come under strain.
Under the worst test scenario - this assumes that a 10 per cent cut in revenue, 10 per cent foreign exchange depreciation and 100 basis-point hike in interest rates happen all at once next year - three sectors emerged as the most resilient: China water-utility stocks, healthcare and manufacturing.
"No sector can be bullet-proof but, at best, some are less affected than others," said Maybank Kim Eng, which released the study last week. It noted that among the China water-utility firms, SIIC Environment Holdings and China Everbright International would appear the most hardy "as they derive more revenue from water treatment".
"Tariffs are pegged to agreed formulas with local governments while demand is supported by off-take guarantees."
Healthcare stocks such as Q&M and Raffles Medical would also be "stoic" performers, as they are "buffered by the largely non-elective procedures they offer".
"Under (the worst scenario), their earnings could drop 12 to 16 per cent when revenue declines, while foreign exchange and interest rate changes do not really move the needle," said the report. It added that manufacturers such as Innovalues, Valuetronics Holdings and Venture Corporation - which earn the bulk of their revenues in US dollars - should benefit from the strengthening greenback as they reap cheaper production costs.
But pressure points remain in other parts of the Singapore market.
This is particularly so in the offshore and marine, property and banking sectors - already under pressure - which could be "severely tested" by falling oil prices, rising interest rates and depreciating currencies, noted the report.
In the event of a market shock, highly geared offshore and marine asset owners like Vard Holdings, Pacific Radiance and Swiber Holdings may need to "recapitalise their equity, restructure their debt or face consolidation", it said.
Developers CapitaLand and OUE would also be at risk of cash-flow constraints as their earnings before interest, tax, depreciation and amortisation (Ebitda) fall to "dangerous levels", while the local banks could well see profits slump by up to 80 per cent.
Still, the Singapore market, along with Thailand and India, appears to be more resilient compared with others in the region, said Maybank Kim Eng.
China and Indonesia stood out as the most vulnerable, with China the only country to log a negative free cash flow in the stress test.
"This could be a consequence of excess capacity in China, meaning a shock has a greater impact on cash flows," noted the report.