Excerpts from recent 2010 outlook forecasts by analysts…..
UBS Investment Research analysts: Min Lan Tan & Vey Sern Ling
What are the likely key themes for 2010?
1) A step-up in domestic demand, accompanied by a structural revival in tourism should bode well for domestic services stocks.
2) The job market could bounce strongly in H110. Already, hiring intentions have risen sharply, especially in banking and finance. Office assets should benefit.
3) The government is likely to remain vigilant ona potential asset bubble in residential property, with no let-up in negative policy risk.
4) Market volatility typically rises sharply at inflexion points in Fed funds policy.Where the rate increase is measured, returns have been positive three to six months after the first rate hikes, and initial corrections were buying opportunities.
What are the likely key catalysts?
� The opening of Resorts World Singapore in early February 2010 and Marina Bay Sands later in the year should result in a highly visible step-up in domestic demand activity.
� The likelihood of general elections in 2010 should mean a household friendly budget being announced in February 2010.
What are our most non-consensus sector calls?
Overweight office at the expense of residential stocks. We now expect office rents to rise 25% in 2010, and overall vacancy to fall to 10.4% by 2013 from12.2% in 2009.
� Overweight domestic services (airport, media, postal, transport) stocks for a potential step-up in domestic demand rather than yields.
� Underweight Genting Singapore as we believe its investment proposition lies in the size of Singapore’s gaming market (which we estimate at US$2bn in 2010), not the number of visitors to RWS. We are also Underweight Singapore Airlines as we believe the carrier is losing market share, while fuel price could remain a challenge.
Credit Suisse analysts: Sean Quek & Kwee Hong Ching
We see three key themes for Singapore in 2010. Firstly, consensus earnings upgrades, which have helped to drive share price performance in 2009, are expected to continue into 2010 on a more positive top-line and margin outlook. Transport, in particular, should see meaningful upgrades, in our view.
On the other hand, we are concerned about the market’s bullish expectations on Singapore’s potential gaming revenues and maintain an UNDERPERFORM rating on Genting.
● Finally, we see cash distribution returning in a big way driven by a combination of record capital fund raising and better-than expected free cash flows. Historically, there has been a strong relationship between improvements in cash position and subsequent dividend distributions. Stocks we believe that could dish out higher/special dividend would include CapitaLand, SIA, Keppel, M1 and SPH.
Goldman Sachs predicts 36% returns on Asian stocks in 2010
ASIAN STOCKS may offer returns of 36 percent in dollar terms next year, helped by growth in emerging markets, Goldman Sachs Group Inc. said in the most optimistic of three brokerages’ reports on the region’s equities in 2010.
The MSCI Asia-Pacific excluding-Japan Index may gain to 540 by next December, while the MSCI Asia excluding-Japan Index may rise to 650, Goldman Sachs analysts led by Timothy Moe wrote in a report.
Goldman Sachs is more bullish than BNP Paribas and Citigroup Inc., which predicted gains of between 9 percent and 20 percent for Asian stocks next year.
The brokerage has also turned more positive in the past month, when it predicted a “sluggish” performance for regional markets next year amid slowing economic indicators and after a rally from their March lows lifted valuations.
To read more, click on Bloomberg report here.