20-05-2013, 09:14 AM
Bubble where got safe one? Analyst talking rubbish but its certainly TINA
19 May 2013
Singapore
Strategy Note
Strategy |PDF
We are in a safety bubble!
UNDERWEIGHT - Maintained
Author(s): Kenneth NG, CFA,
________________________________________
▊ While the Singapore market scales new highs, like stockmarkets around the world, it is the yield stocks and the stocks with earnings predictability that have outperformed. The results season showed just why – earnings for cyclical sectors continue to see cuts. In contrast, earnings were upgraded for banks, telcos and REITs. When investors look for stocks today, they want yield and earnings visibility. We see no reason for this to change. Yes, we are in a “safety” bubble and it looks likely to inflate further. We maintain an Undeweight on the FSSTI, with de-rating catalyst being full valuations for Index stocks. Our end-CY13 bottom-up target is raised by 2% to 3,460.
We are in a safety bubble!
In the late 1990s, we had the tech bubble. In the mid-2000s, developed markets had their own property bubble. With a 2008 crisis and an unresolved Europe debt problem as a backdrop now, QE is only good enough to encourage investors to go for yield and stocks with earnings certainty. In Singapore, REITs, consumer names, STE and SIAEC have hit peak valuations but continue to attract interest. As with all bubbles, this one will burst eventually also but in the meantime, as the names go up, it will be painful to sit it out.
Negatives outnumber positives
Data points from the 1Q13 results season do not provide any meat to stray from the safety bubble anyway. The number of misses outnumbers the outperformers. Tellingly, EPS cuts are coming from most of the externally exposed sectors. We provide a Corporate Singapore trendbook here, identifying three most distinct trends in each sector, gleaned over 1Q. We are incrementally positive on telcos, financials, property and consumer but more negative on capital goods, commodities and transport.
Top picks
Our index top picks are DBS, Thai Beverage, UOL, GLP, Capitaland and ST Engineering. Our non-index picks are SATS, Tat Hong, Biosensors, Courts Asia, Ezion and Vard. For sectors, we raise financials to Overweight and telcos and REITs to Neutral. We chop commodities and transport back to Underweight.
19 May 2013
Singapore
Strategy Note
Strategy |PDF
We are in a safety bubble!
UNDERWEIGHT - Maintained
Author(s): Kenneth NG, CFA,
________________________________________
▊ While the Singapore market scales new highs, like stockmarkets around the world, it is the yield stocks and the stocks with earnings predictability that have outperformed. The results season showed just why – earnings for cyclical sectors continue to see cuts. In contrast, earnings were upgraded for banks, telcos and REITs. When investors look for stocks today, they want yield and earnings visibility. We see no reason for this to change. Yes, we are in a “safety” bubble and it looks likely to inflate further. We maintain an Undeweight on the FSSTI, with de-rating catalyst being full valuations for Index stocks. Our end-CY13 bottom-up target is raised by 2% to 3,460.
We are in a safety bubble!
In the late 1990s, we had the tech bubble. In the mid-2000s, developed markets had their own property bubble. With a 2008 crisis and an unresolved Europe debt problem as a backdrop now, QE is only good enough to encourage investors to go for yield and stocks with earnings certainty. In Singapore, REITs, consumer names, STE and SIAEC have hit peak valuations but continue to attract interest. As with all bubbles, this one will burst eventually also but in the meantime, as the names go up, it will be painful to sit it out.
Negatives outnumber positives
Data points from the 1Q13 results season do not provide any meat to stray from the safety bubble anyway. The number of misses outnumbers the outperformers. Tellingly, EPS cuts are coming from most of the externally exposed sectors. We provide a Corporate Singapore trendbook here, identifying three most distinct trends in each sector, gleaned over 1Q. We are incrementally positive on telcos, financials, property and consumer but more negative on capital goods, commodities and transport.
Top picks
Our index top picks are DBS, Thai Beverage, UOL, GLP, Capitaland and ST Engineering. Our non-index picks are SATS, Tat Hong, Biosensors, Courts Asia, Ezion and Vard. For sectors, we raise financials to Overweight and telcos and REITs to Neutral. We chop commodities and transport back to Underweight.
