The promising start to the year displayed by Singapore equities should hold up for the rest of the first quarter, Credit Suisse tipped in a report out yesterday.
The benchmark Straits Times Index (STI) has surged nearly 6.4 per cent to 3,064.85 points so far this year - with the sizzling start sparked mainly by banking stocks.
"The Singapore market has been outperforming the MSCI Asia Pacific since November 2016, as the turnaround in inflation and interest rate expectations after the United States presidential election drove a strong recovery in bank shares," said Ms Kum Soek Ching, head of South-east Asia research, private banking research at Credit Suisse.
A surprise rebound in the country's economic growth in the fourth quarter last year also helped to dispel some market gloom, Ms Kum added in the report.
Singapore's GDP expanded by 9.1 per cent on a quarter-on-quarter seasonally adjusted basis and grew by 1.8 per cent against the previous year. This pushed up full-year growth for 2016 to 1.8 per cent, according to advance estimates announced earlier this month.
Credit Suisse Investment Bank has forecast just 1.1 per cent GDP growth this year, premised on the negative impact of potential trade protectionist measures and rate hikes in the US.
While the Singapore economy is vulnerable to collateral damage from potential trade protectionism by the US, it could surprise on the upside on a synchronised global trade recovery this year.
MS KUM SOEK CHING, head of South-east Asia research, private banking research at Credit Suisse.
However, Ms Kum noted that recent cyclical indicators such as the manufacturing purchasing managers' index - which has been expanding since September - are mirroring improving economic data in the euro zone and the US.
"While the Singapore economy is vulnerable to collateral damage from potential trade protectionism by the US, it could surprise on the upside on a synchronised global trade recovery this year," she said.
Credit Suisse expects the banking sector to be a "market outperformer in 2017 as funds close their underweight position in banks". It is projecting loans growth of about 5 per cent for banks, and net interest margin improvement due to the repricing of loans should boost revenue.
Among the three local banks, Ms Kum tipped DBS Bank as the biggest beneficiary of an improved net interest margin outlook, owing to factors such as its higher current account and savings ratio, and larger loan portfolio linked to US rates.
The real estate sector shows signs of bottoming out as home prices fell at a slower pace last year while the flood of new supply is receding.
Credit Suisse picks City Developments and UOL Group as "value plays" and proxies to the recovery in the property market.
Ms Kum believes the consensus market earnings growth of 4.8 per cent estimated for this year is "highly achievable", thanks to the low base in 2016.
"Seasonally, the Singapore market has tended to perform better in the first quarter. This year may be no different," Ms Kum added.