BT: Analysts staying bullish on SGX in the new year (17 Dec 2007)
Analysts staying bullish on SGX in the new year
But wild card is whether the US goes into a recession and how Asia responds
By LYNETTE KHOO
(SINGAPORE) With lingering market uncertainties and repricing of risks, 2008 is probably going to be a less exciting year for the stock market, compared to the record-breaking run this year.
But analysts are betting that on the whole, share prices would remain on an uptrend.
'2008 would still be an okay year though it will not be as exciting as this year,' said Gabriel Yap, senior dealing director at DMG & Partners Securities. 'On a technical basis, the key support lines have not been broken.'
He added that 2008 would be a year where the great investors - those who are able to make profits even in volatile markets - would shine.
With current concerns over the US sub-prime fallout, a slowdown in the US economy and high oil prices, any market gains would be hard-fought, analysts said.
Most predicted that the market would be more choppy in the first half of 2008 before some stability sets in in the second half.
'The sub-prime mortgage crisis with its impact on the US economy is not going to disappear overnight and may still cause market volatility during the first half of next year,' said Yeo Kee Yan, retail market strategist at DBS Research Group.
With wild swings likely to persist, he recommended buying on weakness at the Straits Times Index (STI) level of 3,000-3,300 and selling into strength at 3,700-4,000.
UOB Kay Hian analyst K Ajith expects the STI to drift sideways in the 2,960-3,900 range at least in the first half next year given the market's uncertainty and a higher risk premium.
To recap, a liquidity-driven rally saw the STI breaking new highs in the first half of 2007 on the back of record property prices and surging Chinese markets. But the second half was dampened by credit woes arising from the US sub-prime crisis, sending the STI below the 3,500 level.
Last Friday, the STI closed 12.93 points or 0.37 per cent lower at 3,466.38, after credit ratings downgrade for US banking giant Citigroup, and Lehman Brothers' warning about further writedowns further sapped market confidence.
While destabilising factors remain, analysts believe that a doomsday scenario is unlikely.
'We are unlikely to see panic-selling. The Fed has shown flexibility to ensure that the US does not go into a recession and most people are looking at a 75 basis point cut to 3.5 per cent,' Mr Yap said.
Analysts said that the wild card really is whether the US goes into a recession, and how Asia responds. As of now, the Asia outperformance story looks intact, and Singapore's economy is still supported by strong domestic demand, with non-US export demand picking up the slack from the US.
'The strength of the domestic economy underpins our optimistic outlook on Singapore,' Merrill Lynch said, pegging its bottom-up STI target for 2008 at 4,426.50.
'We believe the recent market retreat represents an excellent opportunity to buy into the re-rating of Singapore.'
Analysts said that they like China plays, particularly consumer stocks that are catalysed by China's growth story and the Beijing Olympics 2008. Huge QDII (qualified domestic institutional investors) inflows are also expected next year as more such funds obtain Chinese regulatory approval to invest in S-shares.
'That's (QDII) going to spark tremendous revaluation of S-shares largely due to the large valuation gap between Singapore and China/Hong Kong,' Mr Yap said.
So far, S-shares are trading at an undemanding forward PE of about 14.5 times compared to A-shares and H-shares at 28.6 times and 18.1 times respectively.
Analysts recommended taking up some defensive positions next year but have mixed views on banking and offshore marine stocks. Although the fundamentals for these sectors remain strong, some analysts believe banks could see more turbulence before the sky clears, while the huge foreign exchange losses incurred by Labroy Marine and SembCorp Marine, reflecting the US dollar exposure among such stocks, is cause for concern.
With the market still pricing in slowing US consumption and rising inflation, CIMB-GK analyst Kenneth Ng believes that company-specific drivers will become more relevant than these broad sectoral themes. 'We see 2008 as a year for selective stock-picking, above broad sector bets.'
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
But wild card is whether the US goes into a recession and how Asia responds
By LYNETTE KHOO
(SINGAPORE) With lingering market uncertainties and repricing of risks, 2008 is probably going to be a less exciting year for the stock market, compared to the record-breaking run this year.
But analysts are betting that on the whole, share prices would remain on an uptrend.
'2008 would still be an okay year though it will not be as exciting as this year,' said Gabriel Yap, senior dealing director at DMG & Partners Securities. 'On a technical basis, the key support lines have not been broken.'
He added that 2008 would be a year where the great investors - those who are able to make profits even in volatile markets - would shine.
With current concerns over the US sub-prime fallout, a slowdown in the US economy and high oil prices, any market gains would be hard-fought, analysts said.
Most predicted that the market would be more choppy in the first half of 2008 before some stability sets in in the second half.
'The sub-prime mortgage crisis with its impact on the US economy is not going to disappear overnight and may still cause market volatility during the first half of next year,' said Yeo Kee Yan, retail market strategist at DBS Research Group.
With wild swings likely to persist, he recommended buying on weakness at the Straits Times Index (STI) level of 3,000-3,300 and selling into strength at 3,700-4,000.
UOB Kay Hian analyst K Ajith expects the STI to drift sideways in the 2,960-3,900 range at least in the first half next year given the market's uncertainty and a higher risk premium.
To recap, a liquidity-driven rally saw the STI breaking new highs in the first half of 2007 on the back of record property prices and surging Chinese markets. But the second half was dampened by credit woes arising from the US sub-prime crisis, sending the STI below the 3,500 level.
Last Friday, the STI closed 12.93 points or 0.37 per cent lower at 3,466.38, after credit ratings downgrade for US banking giant Citigroup, and Lehman Brothers' warning about further writedowns further sapped market confidence.
While destabilising factors remain, analysts believe that a doomsday scenario is unlikely.
'We are unlikely to see panic-selling. The Fed has shown flexibility to ensure that the US does not go into a recession and most people are looking at a 75 basis point cut to 3.5 per cent,' Mr Yap said.
Analysts said that the wild card really is whether the US goes into a recession, and how Asia responds. As of now, the Asia outperformance story looks intact, and Singapore's economy is still supported by strong domestic demand, with non-US export demand picking up the slack from the US.
'The strength of the domestic economy underpins our optimistic outlook on Singapore,' Merrill Lynch said, pegging its bottom-up STI target for 2008 at 4,426.50.
'We believe the recent market retreat represents an excellent opportunity to buy into the re-rating of Singapore.'
Analysts said that they like China plays, particularly consumer stocks that are catalysed by China's growth story and the Beijing Olympics 2008. Huge QDII (qualified domestic institutional investors) inflows are also expected next year as more such funds obtain Chinese regulatory approval to invest in S-shares.
'That's (QDII) going to spark tremendous revaluation of S-shares largely due to the large valuation gap between Singapore and China/Hong Kong,' Mr Yap said.
So far, S-shares are trading at an undemanding forward PE of about 14.5 times compared to A-shares and H-shares at 28.6 times and 18.1 times respectively.
Analysts recommended taking up some defensive positions next year but have mixed views on banking and offshore marine stocks. Although the fundamentals for these sectors remain strong, some analysts believe banks could see more turbulence before the sky clears, while the huge foreign exchange losses incurred by Labroy Marine and SembCorp Marine, reflecting the US dollar exposure among such stocks, is cause for concern.
With the market still pricing in slowing US consumption and rising inflation, CIMB-GK analyst Kenneth Ng believes that company-specific drivers will become more relevant than these broad sectoral themes. 'We see 2008 as a year for selective stock-picking, above broad sector bets.'
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.
posted by mrmoon at 9:25 AM
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