A series of news articles and data points have been throwing light on the softness of the local retail environment. It is now all too familiar that retailers are facing pressure from slowing sales and high operating costs, while malls in certain regions are seeing gradually higher vacancy rates.

Moreover, 1Q16 consumer confidence has declined to 88 from 94 in 4Q15, according to data from Nielsen. A value lower than 100 indicates degrees of pessimism. The latest economic data points include declines in consumer prices for the 18th month.

While the outlook for the sector and macro environment remains soft, we understand that stocks under our coverage (Sheng Siong Group, BreadTalk, QAF) continue to post positive underlying performance for their operations in Singapore, exemplifying brand strength to some extent. Amid expectations for a broadly muted outlook, our picks remain as Sheng Siong Group [BUY, S$0.95], Thai Beverage [BUY, S$0.83], QAF [BUY, S$1.27].

Source: OCBC Research - 26 May 2016