Experts' outlook on STI

The Singapore Exchange (SGX) Centre at Shenton Way.
The Singapore Exchange (SGX) Centre at Shenton Way. PHOTO: ST FILE

The Sunday Times takes a look at what financial experts see in store for the Straits Times Index this year.

GLOBAL RECOVERY WILL FUEL GROWTH

The global recovery will continue to drive economic growth in this region. Singapore was an early beneficiary of this recovery since the end of 2016. We believe this will continue to drive a more sustainable earnings growth. The improvement in Singapore's real economy will broaden from the manufacturing sector to the rest of the economy this year.

The STI is still trading below its all-time high of 3,831 achieved on Oct 31, 2007. Among the Asean countries, Singapore is the destination of choice that offers the strongest combination of earnings growth (8.4 per cent), lowest valuation (14 times) and highest dividend yield (3.2 per cent).

Our STI year-end objective is 3,688 and we do not rule out a re-rating catalyst pushing up STI's target valuation to 3,800. The Singapore strategy team favours banks, property, consumer goods and offshore and marine sectors to ride the broad-based recovery as well as rising oil prices.

MS JANICE CHUA, head of research, equities, DBS Bank.


BETTING ON LOCAL BANKS, PROPERTY COUNTERS

Fundsupermart has a bullish call on the STI, and we are looking at a potential price of 4,400 by the end of 2019. We see the local banks and property counters benefiting in the two years to come from a gradual rise in property prices as well as an uptick in local and foreign economic activity. The local banks should also benefit from a rise in interest rates that would help boost their net interest margins. Among the various banks and property counters, DBS and CapitaLand are two counters that investors should have on their watch list at the very least.

MS RACHEL NG, analyst, research and portfolio management, Fundsupermart.


POTENTIAL TO RISE

We see further upside ahead, but not in the same quantum as in 2017. Still, there is room for upside for the Singapore market in 2018 as it is likely to benefit from the conducive environment of healthy global economies. Developments such as the US tax reforms should have a positive impact on corporate earnings.

In 2018, an upside of 7 per cent to 8 per cent is possible for the Singapore market, which means the STI potentially touching the 3,700 mark. But anything beyond 20 per cent will bring valuations to a stretch, unless earnings come in strongly.

MS CARMEN LEE, head of OCBC investment research.


MOMENTUM LIKELY TO CONTINUE

The momentum from 2017 is likely to continue into the start of 2018, with a near-term target of 3,550 for the STI. Some consolidation could be expected thereafter, awaiting more evidence of sustained earnings growth from the synchronised global recovery before the STI has a chance of testing the 2007 highs of 3,900.

MR SAM PHOEN, co-founder of Wateram Capital.

A version of this article appeared in the print edition of The Sunday Times on January 07, 2018, with the headline 'Experts' outlook on STI'. Print Edition | Subscribe