Modest forecast for STI year-end target

[SINGAPORE] The Straits Times Index (STI) is expected to continue its upward trend as money supply in the US is still increasing, but analysts say that growth will be at a modest 3 per cent since projected market return on equities are still below long-term averages.

In its June report, UOB Kay Hian estimated the STI's year-end target to be 3,400 due to a price earnings and price-to-book valuation cut of 10 per cent on below-trend return on equity.

"Also, the world will have to contend with implications from an eventual, albeit modest, rise in interest rates as US tapering continues with the bond buying programme scheduled to end in Q414 and for interest rates to gradually trend up in mid-15.