Defensive stocks safe but US bonds safer
The biggest lesson of the market crash is how S'pore asset owners will not be spared when investors flee Asia
NOT too long ago, the world was caught up in the "search for yield" story. The hypothesis is that developed countries with ageing populations will see slower growth, even as retirees need dividends to live on. Hence defensive yield stocks will be popular. A second leg to the story goes like this: Given a low interest rate environment where bonds return next to nothing, investors have no choice but to be in stocks, especially when rates eventually move up.
After the market collapse of the past month, the first story, arguably, still applies. A global consumer staples mega-defensive stock like Unilever, known for brands such as Dove soap, Lipton tea and Persil washing powder, is still trading at 20 times earnings. This is towards the higher end of its historical trading range. Locally, supermarket operator Sheng Siong is still flying high at 24 times earnings. It is up around 20 per cent for the year. The past month saw it slide just a few per cent. Meanwhile, healthcare play Raffles Medical Group is still trading at 35 times earnings.
Nobody is panicking there.
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