AS global markets continue to grapple with contagion uncertainties following Britain's decision to leave the European Union, CIMB analysts say this may not be the best time to buy at dips.
Analysts Lim Siew Khee and Kenneth Ng noted that the blue-chip Straits Times Index (STI) has fallen more than 2 per cent post-Brexit. At 11.55am on Monday, the STI was trading at 2,724.41, down 0.40 per cent, or 10.98 points.
"We see this knee-jerk sell-down as an indiscriminate one, not focused on any direct exposure with the GBP or Euro," the two analysts said. "The road ahead is difficult and this may not be the best time to hunt for Brex-dip."
However, they said telcos, selective real estate investment trusts (Reits) and US dollar gainers could offer some reprieve.
"Our top picks are Singtel, MAGIC, CCT, Venture, ST Engineering, Genting Singapore, Tianjin Zhongxin Pharmacel and SATS," the analysts shared.
They felt that telcos enjoy "shelter in a turbulent environment".
"The hefty investment required and the lack of track record by the potential fourth telco could stall the bid for the upcoming spectrum auction, protecting the turf of the exiting incumbents in the meantime," the anlaysts said, adding that Singtel is their preferred pick with the least risk of market share loss. CIMB has a target price of S$4.50 a share for Singtel.
On Magic, the analysts felt it is a candidate on an FX tailwind with resilient portfolio, underpinned by Festival Walk. They noted that more than 70 per cent of its first-half 2017 distribution income has been hedged with income stability. They also like CCT for the boost from CapitaGreen.
There are also stocks such as Venture Corp which benefit from a stronger US dollar. Others include ST Engineering, with about 24 per cent of its revenue and assets based in the United States.
Tourism play such as Genting Singapore is also worth a look. CIMB analysts said a weaker Singapore dollar could back the influx of Chinese tourists into Singapore. If so, SATS will benefit from higher Changi traffic.
As for Tianjin Zhongxin, they felt it is fairly immune to currency woes and is geared to benefit from the macro trend of an ageing population in China.
On local banks - DBS, UOB and OCBC - the anlaysts said direct impact comes from the ownership of any debt papers or investment securities linked to UK or European banks.
"Although UOB has been caught with the highest amount of Europe bank debt exposure in 2011, the 2011 Euro crisis and the new Basel charges (for holding of other FIs' investment securities) have spurred the banks to pare that down significantly.
"We believe all three banks do not own much European bank investment securities in their AFS book. That aside, all three banks are potential losers to a weak revenue generation environment if capital markets continue to crumble."
A plausible winner, they added, is Singapore Exchange, if London derates as a global financial centre in the longer term.