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CIMB Research - Navigating Singapore
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Publish date: Thu, 01 Dec 2011, 11:37 AM
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In a war where bears threaten to overwhelm, the only counter is guerilla warfare (short-term trading) or sniping (aim for the right stocks, right prices). Much of the sniper's work involves choosing the battlefield, laying the ground. We suggest investors do the same.
We maintain our end-CY12 FSSTI target of 2,680 (1.3x P/BV) but expect markets to head lower before they can recover. We identify FSSTI levels at 2,280 where we would stop being such a bear and turn more constructive. Picking winners for the Asian decade ahead will then be more fruitful.
We reiterate our fears that the world could be heading for a European banking crisis and eventually, a US currency crisis. The global outlook is akin to dominoes quivering in the wind. All eyes are watching for the first big domino to fall: the Italian bond market. There's no obvious solution in Europe except printing money. There is no ECB rule that allows for this transient 'solution', unless the peripheral commits itself to more hardship. As Europe cracks and cleanses itself of debt, the spotlight will shift to a stalling US with higher debt ratios. We reckon a sovereign default in Europe is just the starting point of a global debt-cleansing act. Singapore equities would get dragged down by sentiment and could get cheaper.
Prefer defensive sectors
With a defensive top-down view, we are Overweight on Telcos and REITs, Underweight on Property, Transport and, Capital Goods. We are Neutral on Financials and Commodities. Banks may have less downside to troughs than other cyclicals; they will also have opportunities to win market shares as rivals pull out. Commodities have underperformed sharply after disappointing results and warrant a less bearish stance.
Stock picks
Other than defensive REIT and Telco picks, we believe it is opportune to position in strong Asian franchises that could benefit from the rising Asian consumer. Our picks in this category include DBS, Genting Hong Kong, GLP, Olam and Wilmar. (Read full report)
CIMB top picks for 2012
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
