Are you prepared for the imminent market correction?

2017 is one of best years in recent history. The STI is already up 13% in less than 6 months. Can bull markets go up forever? Of course not. A correction will happen sooner or later. Are we due for one soon?

Yes, according to DBS. It thinks that the Straits Times Index will consolidate after hitting 3250. But absent a North Korea war, STI should be supported above 3115.

DBS offers 4 strategies to navigate the market.

Strategy #1 – External over domestic

Economic growth will be driven by external trade-related sectors such as IT and electronics. The outlook for Singapore’s main trading partners – US and regional economies are also looking up.

  • Prefer Venture Corp and UMS as they will benefit from stronger global demand.
  • Muted growth for domestic stocks facing structural challenges such as labour shortage and subdued consumer confidence – Katrina Group, CapitaLand Mall Trust, SPH REIT

Strategy #2 – Focus on stocks with Target Price or Earnings forecast uplift

With growing optimism over economic data, pick stocks with earning forecast or TP uplift.

  • Venture – riding on favourable macro tech trends and favourable currency.
  • M1 – potential bidders to takeover company could buoy stock prices
  • Capitaland Retail China Trust (CRCT) – Market has underestimated potential for positive rental revisions in Xizhimen and Wangjing

Strategy #3 – Interest uptick in Hospitality REITs

  • CDL Hospitality REIT stock prices rose after 1Q17 DPU was higher than expected due to contributions from New Zealand and Singapore hotels.
  • OUE Hospitality REIT could benefit from acquisition of Crown Plaza Changi Airport extension and new store openings (Victoria Secrets and Michael Kors).

Strategy #4 – Cautious on outperformers

Stocks that outperformed the STI could be ripe for profit taking – City Developments, Keppel Corp and UOB

 

 

 

 

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