Singapore's low P/Es, robust yields a draw for longer-term investors

IN a year beset by trade conflicts, weakening growth in China and Brexit uncertainties, Singapore's Straits Times Index lost 9.8 per cent, but still outperformed the MSCI Asia ex-Japan index in 2018. All sectors traded lower, but banks, Singapore real estate investment trusts (S-Reits) and index heavyweights were the most resilient in 2018.

Consensus EPS growth expectations for 2018E and 2019E have been trimmed to 12.7 and 6.9 per cent, respectively, with risks to the downside, in our view, as the open and export-oriented Singapore economy starts to feel the chill of a global trade slowdown. Economic growth dipped to 2.2 per cent in Q4 2018 from more than 4 per cent in the first half of the year, taking full-year 2018 growth to 3.3 per cent.

Meanwhile, the electronics sector has contracted since November 2018, along with the contraction in factory output elsewhere in Asia. For 2019, consensus is projecting growth of 2.6 per cent and inflation of 1.3 per cent.