Correction is imminent. Brace for impact!

Recent optimism across global markets has also lifted the Singapore market. However, Daiwa Securities, one of Asia’s leading financial services firm, is less upbeat about the 2017 outlook for the Republic, as a weak economy and depreciating currency are expected to plague the country in the foresseable future. In addition, a potential increase in US protectionism and poorer US-China relationship have now skewed the risks to the downside. How should one nagivate and position our stock portfolio in this environment? Daiwa has a few suggestions.

How to position ourselves?

  • Overweight BANKS – Banks are expected to benefit from rising interest rates.
  • Overweight LAND TRANSPORT – ComfortDelGro is likely to gain from government’s infrastructure and connectivity initiatives over the coming year.
  • Neutral REAL ESTATE – Property market lacks catalysts, and may suffer from declining rental rates and rising vacancies. However, sector still offers some value since some stocks trade at a discount to their book values. Prefer developers to REITs.
  • Underweight TELCOS – Telecom operators are likely to reel under more intense competition.
  • Underweight OIL & GAS – Industry to face pain from restructuring despite stable oil prices.

Daiwa’s Top Picks

  • Index picks – DBS, OCBC, City Developments, ComfortDelGro
  • Off-index picks – Accordia Golf Trust, Frasers Centrepoint Ltd, Sheng Siong, Starhill Global REIT, Yoma Strategic