Singapore equity analysts aren't as optimistic as global funds

[SINGAPORE] Analyst expectations for Singapore equities have yet to catch up with the optimism displayed by some global investors.

Fund managers and strategists at Fidelity International, Citigroup and Bank of Singapore are bullish on the city-state's US$396 billion stock market, citing valuations, fiscal stimulus and the reopening of the economy. The sell side, however, sees only limited upside for the nation's benchmark index.

The Straits Times Index (STI), which has risen 19 per cent from a low in March, is projected to rise another 10 per cent over the next 12 months based on analyst consensus, close to the lowest estimated return since 2018, according to data compiled by Bloomberg.

Singapore is "one of the cheapest" markets in Asia and its economy is reopening, Fidelity fund managers, Paras Anand and George Efstathopoulos said in a web briefing on Thursday.

The South-east Asian nation has started to ease its nationwide lockdown this month after providing stimulus amounting to about 20 per cent of its gross domestic product to contain what may possibly be its worst contraction since independence in 1965. The city-state is on track to lift more restrictions on companies and residents by the end of June.

The STI is still down about 17 per cent this year and is trading near a record-low valuation of 0.9 times book value, significantly lower than the 2.2 times for the MSCI All-Country World Index.

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For Eli Lee, head of investment strategy at Bank of Singapore, the low valuations for Singapore stocks will work in their favour as "investors are looking to participate by seeking value plays which have lagged", he said.

The sell side may have limited optimism for Singapore stocks, but the global rotation toward cyclical and value shares will continue to support the local market in the near term, he said.

Ken Peng, head of Asia investment strategy at Citi's private-banking arm, said Singapore is among the team's top picks due to the stimulus given by the nation's government to contain the damage caused by the pandemic. The bank bought shares of Singaporean companies last month and expects industrial, export and transportation segments to do better than others.

BLOOMBERG