The Singapore economy is recovering but it is likely to stay so subdued this year that the Government could implement the largest fiscal stimulus package in a decade, said HSBC Private Bank yesterday.
The bank expects a "highly expansionary" Budget next month and estimates that the deficit may widen to 1.3 per cent of the gross domestic product on the back of packages aimed at restoring business confidence.
It has raised its growth forecast for this year from 0.9 per cent to 1.5 per cent. The growth estimate for last year was raised from 0.4 per cent to 0.8 per cent.
The bank is "neutral" on the Singapore equity market for this year given that economic growth is likely to remain tepid.
Mr James Cheo, HSBC Private Bank's chief market strategist for South-east Asia, said: "Upside for equities will probably fall in the single digits, but hopefully towards the 7 to 8 per cent range."
He advised investors to look at listings that are well positioned to capture the growing consumer spending power in South-east Asia.
Among Singapore-listed real estate investment trusts (Reits), which Mr Cheo acknowledged remain "crucial for the bank's clients" as a source of dividend income, there is a preference for those positioned to take advantage of long-term growth trends.
"This includes Reits that are focused on warehousing to tap the growing e-commerce market, as well as data centres which are used for cloud computing," he noted.
With fixed-income yields likely to remain low, Asian dividend plays, such as Singapore's banks, continue to be a compelling source of income generation for investors.
But Ms Fan Cheuk Wan, HSBC Private Bank's Asia chief market strategist, said investors should stick only with quality names.
"Past market performance data has shown that good quality Asian companies with a strong cash flow stream have shown competence in being able to deliver sustained high dividend payouts," she said.
The Straits Times will be providing live coverage as Mr Heng announces the details in Parliament.
Readers can also sign up for e-mail updates of the proceedings.
THE BUSINESS TIMES