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BROKERAGE UOB Kay Hian is targeting the Straits Times Index to close at 3,600 points by the end of 2015.
This implies an upside of about 8 per cent from current levels and includes a 10 per cent discount to long-term price-to-book and price-to-earnings valuations, due to below-trend returns on equity and gross domestic product growth, UOB said.
"We believe 2015 should see corporate earnings pick up (rising 9.2 per cent year on year) after a lacklustre 2014 and 2013. In our view, driving growth in 2015 would be sectors such as banks, telecommunications and plantation. Global growth, while sub-trend, is expected to be supportive," it said.
Investment themes favoured are "winners and losers of higher interest rates, solid oversold stocks, Asean economic community or Asean open skies beneficiaries, and regulatory changes".
Large-capitalisation stocks the brokerage has "buy" calls on include DBS and OCBC banks, telco SingTel, transport stock ComfortDelGro, palm oil counter First Resources, developers CapitaLand and Keppel Land, marine and utilities conglomerate Sembcorp Industries, and real estate investment trust CapitaCommercial Trust.
Key "sell" calls are SIA Engineering Company and IHH Healthcare Berhad.