Singapore Market Strategy
STRATEGY
2009 outlook – domestic disturbance
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Driven by an expected decline in consumer and corporate spending,
domestic demand – which has held up well – is expected to weaken
going into 2009. Consumption growth should also slow; in part
because we expect Singapore’s population to potentially contract by
200,000 people by 2010. Job losses, a shrinking population and falling
asset prices are likely to weigh on domestic demand.
■
As such, we are compelled to stay away from less defensive domestic
plays. In particular, banks remain our biggest UNDERWEIGHT going
into 2009, especially given their performance in 2008.
■
On the other hand, in view of their significant de-rating in 2008, we are
relatively more positive on cyclicals and maintain a moderately
UNDERWEIGHT stance. Within cyclicals, we prefer capital goods over
property.
■
Finally, we continue to favour defensive names – although we are
switching marginally out of those more leveraged to the domestic
economy. We remain OVERWEIGHT on telecoms and transport.
■
On a bottom-up basis, the MSCI should see 20% upside to 264 over the
next 12 months. Regionally, our Asia strategist Sakthi Siva is
UNDERWEIGHT on Singapore.
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Our top picks are SingTel, Wilmar and SIA. Higher beta names we like
include SMM, Olam and Raffles Ed. The least preferred names are
OCBC, COSCO and CCT.

Domestic disturbance
Driven by expected declines in consumer and corporate spending, domestic demand –
which has held up well – is expected to weaken going into 2009E. Consumption growth
should also slow, in part because of our expectation that Singapore’s population will
potentially drop by 200,000 by 2010. Job losses, a shrinking population, and falling asset
prices are likely to weigh on domestic demand. As such, we are compelled to stay away
from less defensive domestic plays. In particular, banks remain our biggest
UNDERWEIGHT going into 2009, especially given their performance in 2008. On the other
hand, in view of their significant de-rating in 2008, we are relatively more positive on
cyclicals and maintain a moderately UNDERWEIGHT stance. Within cyclicals, we prefer
capital goods over property. Finally, we continue to favour defensive names although we
are switching marginally out of those that are more leveraged to the domestic economy.
We remain OVERWEIGHT on telecoms and transport.