SINGAPORE (THE BUSINESS TIMES) - While recovering, economic growth in Singapore is likely to remain subdued in 2020, which HSBC Private Bank has said could result in a fiscal stimulus package that may be the largest in a decade.
Expecting the Singapore government to embark on a "highly expansionary" Budget in February, HSBC said the deficit may widen to 1.3 per cent of gross domestic product (GDP) on the back of packages aimed at restoring business confidence, said HSBC.
It has raised its Singapore economic growth forecast for 2020 to 1.5 per cent from 0.9 per cent. The growth estimate for 2019 was raised to 0.8 per cent from 0.4 per cent.
With economic growth likely to remain tepid, HSBC Private Bank is "neutral" on the Singapore equity market for 2020.
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 7-8 per cent range".
He advised investors to be selective, with a preference for listings that are well positioned to capture growing consumer spending power in South-east Asia.
Among Singapore-listed real estate investment trusts (Reits), which Mr Cheo acknowledged remains "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 said.
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 Fan Cheuk Wan, HSBC Private Bank's Asia chief market strategist said investors should only stick 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.
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