2013 is likely to present a more stable financial environment than 2012, amid an easing Euro crisis, improving visibility in China, and a modestly recovering US economy. Asia, in particular, China, will continue to lead the growth, just like in the past. The past four years have shown that Asia does not need strong growth from US and the Eurozone to grow strongly itself. All it needs is the absence of collapse.

The economy of China has probably bottomed in 3Q12. Our China/Hong Kong economist is looking at growth returning to 9%. China's acceleration in fixed asset investment will certainly be able to help lift global growth, and urbanization is the new strategy to spearhead investment.

In terms of stock picks, we reiterated our stance to continue to stay invested in stocks that are potential beneficiaries to a recovery in the Chinese economy. Our picks are CapitaMalls Asia, Midas, Wilmar, HPH Trust, Sound Global and Perennial China Retail Trust.

On the STI, we expect near term upside to be capped at 3200. The strong surge in the STI recently has resulted in some of the stocks like City Developments, SingTel and UOB surpassing their fundamental target prices. We think that stocks may due for pullback and for those investors who are still holding on to their gains may wish to lock in some profit first.

Our analyst gives an update on the property sector. The Singapore government continues to maintain a high supply in the 1H2013 land sale programme, keeping land availability at c14,000 units in 1H13. We expect participation among developers to remain keen, particularly for interesting sites. As such, land prices are likely to be steady and development margins to remain thin. Meanwhile, availability of land would also extend the visibility of potential completed stock of housing in the medium term when developers asset turn. As such, we believe price appreciation potential remains capped. In terms of stock, developers have outperformed YTD, therefore we maintain our selective stock picking stance. We prefer those with a diversified property exposure or with the prospect of enjoying ROE expansion. Our picks remain CapitaMalls Asia and UOL.

Singapore's Non-oil domestic exports (NODX) dipped 2.5% y-o-y in November 2012, after a 7.9% jump in the previous month and below market expectation of a 2.1% growth. Compared to October, last month's NODX fell 0.3, vs -1.2% m-o-m in October. Non-oil domestic electronic shipments tumbled by a bigger 16.5% y-o-y last month, after a 0.8% dip in October. Non-electronic exports rose

6.3%, a small increase compared to the previous month when they increased 12.6%. Pharmaceutical exports, typically a volatile category, surged 29.6% after a 2.7% rise in October. Shipments to the European Union, its biggest export destination, rose 0.5% y-o-y in November, compared with a 8.9% increase in the previous month. Exports to the U.S. fell 7.0% y-o-y while exports to China grew 9.4% after the previous month's 6.6% increase.

Singapore's retail sales in October dipped 1% y-o-y, weighed down by weaker car sales but still better than market expectation of a 1.5% decline. Stripping out vehicle sales, retail sales grew 1.3% y-o-y. Compared with September (seasonally adjusted), retail sales edged up 0.6% (including sales of motor vehicles) and were 0.3% higher when motor vehicles were excluded. In October, sales of motor vehicles slipped 8.5% while sales of optical goods & books, watches & jewellery and recreational goods fell 2.9%, 2% and 1.3%, respectively.

Sound Global has jointly won a significant RMB2.035b water treatment plant project in Changchun City, Jilin in the PRC with China Railway 18th Bureau. This is a build and transfer project (BT) for designed water supply capacity of 500k m3/day with near term capacity at 250k m3/day. This project raised YTD announced contract wins to RMB2.5b, exceeding our RMB1.7b assumption. Including as much as RMB2b of EPC projects unannounced YTD, orderbook is doubled to RMB5b. This news is positive but small yearly contribution, as BT project takes longer to payback. Overall, this project enhances order book visibility of the company but do not boost near term earnings significantly as project recognition is phased out over 12 quarter compared to the typical 6-8 quarters. Maintain Buy with unchanged TP of S$0.90.

Silverlake Axishas secured three new software and services contracts and one ongoing software and services contract expansion totalling approximately RM135m. These customers are located in South East Asia and Africa. These contracts are expected to contribute positively to the results of the Group in the current and next financial years.

ST Engineering's aerospace arm has entered into an agreement to acquire 100% equity interest in Volant Aerospace for US$13.1m. The acquisition is in line with ST Engineering's strategic initiative to develop the cabin interior engineering, manufacturing and repair capabilities for its aerospace sector.

China's vast manufacturing sector expanded in December at its fastest pace in 14 months as new orders and employment rose, adding to evidence of a pick-up in the economy that helped to boost market sentiment. The HSBC flash purchasing managers' index (PMI) for December rose to 50.9, the highest level since October 2011 and the fifth straight monthly gain.