Singapore likely sees mild impact from China's Covid-19 situation: UOBKH

SINGAPORE companies will likely see a mild impact from the resurging Covid-19 situation in China, although the outlook remains cloudy on the Chinese government's zero-Covid strategy, said UOB Kay Hian (UOBKH).

In a report on Tuesday (Mar 22), the research team said it has not made any changes to its earnings forecasts of companies with substantial exposure to China, as the impact at present is likely mild. UOBKH covers 8 Singapore companies with a more than 70 per cent revenue exposure to China.

It also noted that China posted "surprisingly strong" economic data for January and February, which suggests that the policy easing measures are working.

However, the research team said the Russia-Ukraine conflict and the worsening domestic pandemic may warrant a more cautious outlook.

Lockdowns under China's zero-Covid policy will likely impose significant costs to the economy, it said.

Additionally, UOBKH noted that the Straits Times Index (STI)'s current valuations remain undemanding despite being the region's best performing index.

The STI is trading at 13.5 times its estimated price-to-earnings (PE) ratio for 2022, which is 0.5 times below its long-term average PE, even while paying the region's highest yield at 4.1 per cent.

Share prices have likely underperformed amid a sell-off due to market uncertainty, especially in an environment where newsflow appears to be overwhelmingly negative, the research team said.

UOBKH's top large-cap picks for Singapore are Ascott Residence Trust, CapitaLand Investment, Genting Singapore, Mapletree Industrial Trust, OCBC, Singtel, Sembcorp Industries, Thai Beverage, Venture Corporation, Wilmar International and Yangzijiang Shipbuilding.

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