While Morgan Stanley tips Asean-3’s 2013 outlook as slightly more positive, Singapore remains its least preferred market. “Singapore is less attractive than it is perceived to be, despite the recent correction. Singapore’s ROE, earnings growth and valuations are less attractive than Indonesia, Thailand and MSCI World (Developed Market).”
Singapore has the poorest earnings-growth visibility, it says, expecting MSCI Singapore FY12-14 earnings CAGR at 4.0% vs consensus expectations for Asia ex-Japan earnings CAGR of 11.4% over the same period. It expects Singapore could see further downward earnings revisions over the next two years on weak global growth and margin pressures.
It notes Singapore is the only Asean market trading 5.9% below its long-term average P/E; it expects valuations will remain lower for longer on the earnings-growth slowdown. But it still recommends a defensive dividend strategy, expecting as long as global rates and growth remain low, dividend-yielding stocks will continue to do well.
For the Singapore names on its Asean focus list picks, it tips CapitaMalls Asia (JS8.SG) among domestics with high growth visibility, Golden Agri (E5H.SG) and First Resources (EB5.SG) as consumption commodities and SingTel (Z74.SG), Ascendas REIT (A17U.SG), Keppel (BN4.SG) and Olam (O32.SG) for its attractively valued and dividend yield theme.
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