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Lowest forward PE based on UOB Kayhian universe of stocks.

UOB Kayhian issued its 'Market Outlook & Strategy' report yesterday (Dec 9). Excerpts:


The Singapore stock market now trades at a Price/Book of 0.99x (end-Oct 08: 1.08x), marginally below its SARS crisis' Price/Book of 1.09x.

The downside would be 29% if the market were to fall to the Asian financial crisis' Price/Book of 0.70x.

However, the upside would be 80% if the market were to revert to its long-term mean of 1.78x.

The Singapore stock market is unlikely to revisit its Asian Financial Crisis' trough valuation given the following:

a) Singapore corporate and household balance sheets are a lot stronger this time round,
and

b) current interest rates are much lower than 1998 levels. Confidence remains
fragile, but this is how markets typically emerge from major market lows.



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SIA Engineering is the first to maintain the A380. Photo: Internet

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Source: UOB Kayhian

We still favour deep-value high-yield stocks such as Comfort-Delgro, SIA Engineering, Singapore Press Holdings, SingTel and selected REITs (top picks: Frasers Centrepoint Trust, CapitaMall Trust & Ascott Residence Trust).

We suggest augmenting this yield portfolio with high beta deep-value large caps that are well run and have a strong brand name (top picks: Oversea-Chinese Banking Corporation, City Developments & CapitaLand) on sharp market dips.

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