Sunday, January 2, 2011

4 financial experts' forecast for this year

Share market investors had a dizzying ride in 2009 but the pace has been a bit more pedestrian last year, with modest gains of around 10 per cent.


On Friday, the benchmark Straits Times Index (STI) closed at 3,190.04.


That would be welcome in many countries but local traders have been a little spoiled of late.


For full-time investor Isaac Chin, 61, his fortunes have been tracking STI rises in the past two years.


He described the STI performance last year as 'lack- lustre' when compared to the more than $1.5 million gain he enjoyed in 2009 when the STI nearly doubled to 2,897.62 from its March lows of 1,456.


Mr Chin is fully invested in real estate investment trusts (Reits) and DBS preference shares.


'CapitaMall Trust and Suntec Reit remain my favourite picks for this year. They are retail/office plays and Suntec Reit has just acquired a stake in Marina Bay Financial Centre Phase One,' he said.


Mr Chin also believes the STI can reach 3,500 to 3,700 by the middle of this year.


Mr Lim Say Boon, DBS Private Banking's chief investment officer, said 2010 had been a year of sideways trading for shares in the developed world.


'It has been the year of the emerging market theme, as manifested by emerging market equities, local currency emerging market bonds, Asia ex-Japan properties and commodities, which in turn are driven by emerging market growth,' he said.


OCBC Investment Research's head of research Carmen Lee noted several highs and lows last year, with three major areas of action.


Europe's sovereign debt situation remained a drag on market sentiment even after a US$1 trillion (S$1.3 trillion) emergency rescue package managed to quell fears of a new credit crisis.


The United States government announced a US$600 billion quantitative easing package that led to a rally in November on expectation of increased funds flowing into the markets.


China, always closely watched, introduced several rounds of measures, including interest rate hikes, to rein in inflation and drain liquidity from the market.


Despite the volatility in these markets, Singapore's economy clocked up growth of 14.7 per cent last year with expansion of 4 to 6 per cent tipped for this year.


'With the protracted euro zone debt issue and concern over the pace of recovery in the US, this will continue to translate into trading volatility in the market this year,' cautioned Ms Lee.


Mr Lim of DBS expects commodities to outperform.


He stressed the importance of including bonds as diversifiers and insurance against volatility, even in the most bullish of scenarios.


'Depending on the risk appetite of the investor, for example, in our strategic asset allocation models, bonds represent 55 per cent of the portfolio for the most conservative, through to 10 per cent for the most aggressive,' he said.


The Sunday Times polled four financial experts on their market outlook.


MS JANICE CHUA
Head of DBS Vickers Research, Singapore






Q: What are the sector/stock picks for 2011?


We target STI to hit 3,500 by the first quarter of this year and there is even upside potential to 3,600.


We see commodity plays as an inflation hedge.


We expect crude palm oil prices to resume their uptrend from the end of last year through to March due to the weak US dollar, strong demand from China and declining yield.


Our stock picks are Indofood Agri with a target price of $3.20, SembCorp Marine at $5.48, Keppel Corp at $12.20 and Cosco Corp at $2.35.


The trend for strong visitor arrivals should continue into this year, driven by new attractions at Universal Studios in Sentosa, the gear-up to host larger conferences and meetings, the opening of Gardens by the Bay and the International Cruise Terminal.


Hospitality-related stocks should continue to deliver strong earnings and our picks are Genting Singapore with a target price of $2.70, SIA at $18.50, UOL at $5.23 and CDL Hospitality Trusts at $2.28.


Q: What's your tip?


In the Year of the Rabbit, be as fleet-footed since stock valuations have already risen from their bear-market bottom.


The easy money was made during the first 12 months of the global recovery that started in March 2009.


Stock and thematic picks have became more relevant and this skill will be even more essential to have in 2011 as the recovery enters its third year.


MR TERENCE WONG
Executive director at DMG & Partners Research






Q: How do you see 2011 panning out?


It should be an exciting start to the New Year, driven by loose liquidity - thanks to the US Fed's second round of quantitative easing - and low interest rates.


Fund managers are expected to pile in early in the year to build up their positions.


Retail investors who were out of the picture in the fourth quarter of last year will likely re-enter the market in a meaningful way, leading to a broad-based run.


In a maximum bullish scenario where sentiments hit feverish pitch, it is not unfathomable to see the market punch past 10 per cent gains by mid-year.


But the market will likely tame down after that and may settle with 5 per cent to 10 per cent gains for the year.


Q: What are the sector/stock picks for 2011?


Our stock picks include CDL Hospitality Trusts at a target price of $2.51 as Singapore sees record tourism numbers.


Occupancy is very tight at about 92 per cent, which should result in average room rates heading north.


We also like FJ Benjamin, with the target price at 52 cents, as we believe that strong visitor arrivals coupled with the solid job market should boost retailers.


Domestic consumer sentiment is also on the rise in both Malaysia and Indonesia which are FJ Benjamin's key markets.


Other stock picks are Sino Grandness at 56 cents, as it is enjoying strong earnings growth driven by domestic beverage sales and is expanding its distribution network in China; Ezion at $1 and First Resources at $2.05.


MS CARMEN LEE
OCBC Investment Research's head of research






Q: How do you see 2011 panning out?


We remain positive on the Singapore market.


We expect some of the favourable factors last year to spill over into this year.


This include the current low interest rate environment, quality earnings for Singapore blue chips of at least 10 per cent this year and the good liquidity in the market.


However, volatility is likely to remain as euro zone concerns will linger.


Q: What are the sector/stock picks for 2011?


Valuations are fairly attractive at current levels and stocks are inexpensive.


In addition, most STI stocks provide dividend yield of at least 3 per cent.


We see potential for the STI to go up another 10 per cent to about 3,500, largely underpinned by healthy earnings growth.


We are still positive on several sectors including oil and gas, commodity and plantations, health care, Singapore Reits and banking.


Our key stock picks are Ascott Residence Trust at a target price of $1.38, Biosensors at $1.35, CapitaLand at $4.54, DBS at $16, Ezra at $2.27, Genting at $2.53, Hyflux at $3.66, Keppel Corp at $12.50, Mapletree Logistics Trust at $1, Noble at $2.59, Olam at $3.53, Pacific Andes Resources at 40 cents, Sembcorp Marine at $5.70, StarHub at $3.02, UOB at $19.70, UOL at $5.42 and Venture Corp at $12.10.


Q: What's your tip? p>


We advocate investing in quality stocks in the right sectors with good track record, management teams and good order flow.


We prefer to stick with blue chips, in particular, blue chip laggards last year such as DBS, UOB, CapitaLand, Noble and SGX.


MS TAN MIN LAN
Strategist at UBS Investment Research






Q: How do you see 2011 panning out?


We expect the US Federal Reserve to start raising interest rates only in September and by small increases.


This means interest rates here will remain near record lows for the next nine to 12 months.


As a result, Singapore Reits would benefit the most while firms with US dollar or euro revenue and assets in developed markets should feel the drag of a stronger Singapore dollar, specifically tech firms such as ST Engineering, Wilmar and Hyflux.


Meanwhile, retail spending could remain muted as locals increasingly shop overseas.


Year to date, retail sales excluding autos have increased just 7 per cent.


Q: What are the sector/stock picks for 2011?


We like Overseas Union Enterprise at a target price of $4.28 for its significant exposure to prime office space and hotels, and Indofood Agri at $3.70, as it is well positioned to benefit from rising cash flow, improving profitability, lower gearing and potential for dividend payouts following the completion of its major capital expenditure cycle.


Other stock picks are Keppel Land at $5.08, Keppel Corp at $11.10, SembCorp Industries at $5.68, OCBC at $11.30, Sats at $3.40, Noble at $2.70 and DBS at $16.60.


Our least preferred stocks are StarHub, CDL, CapitaMall Trust, ST Engineering and UOB .


lorna@sph.com.sg




VISITOR ARRIVALS UPTREND TO CONTINUE
The trend for strong visitor arrivals should continue into 2011 driven by new attractions in Universal Studios at Sentosa, the gear-up to host larger conferences and meetings, the opening of Gardens by the Bay and the International Cruise Terminal.


MS JANICE CHUA, head of DBS Vickers Research, Singapore








EXCITING START TO THE YEAR LIKELY
It should be an exciting start to the new year, driven by loose liquidity ? thanks to the US Fed?s second round of quantitative easing ? and low interest rates. Fund managers are expected to pile in early in the year to build up their positions.


MR TERENCE WONG, executive director at DMG & Partners Research








IMPACT OF STRONGER SING DOLLAR
Interest rates here will remain near record lows for the next nine to 12 months... Singapore Reits would benefit the most while firms with US dollar or euro revenue and assets in developed markets should feel the drag of a stronger Singapore dollar.


MS TAN MIN LAN, strategist at UBS Investment Research








POSITIVE FACTORS MAY SPILL INTO 2011
We expect some of the favourable factors last year to spill over into this year. This include the current low interest rate environment, quality earnings for Singapore blue chips of at least 10 per cent this year and the good liquidity in the market.

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