UBS upgraded Singapore’s equity market to Overweight in its regional asset allocation.
“Singapore’s equity market is riding on the tailwinds of strong corporate earnings, higher dividends and robust economic data,” UBS said in a note last week.
It noted that the Straits Times Index had touched a one-year high, and it expected further upside from strengthening corporate fundamentals.
UBS said it was also long the Singapore dollar against the U.S. dollar, expecting the Monetary Authority of Singapore to tighten policy again in October after its tightening in April.
Banks were its preferred sector in Singapore, it said.
“We expect the sector to deliver superior earnings growth on the back of improving operating indicators,” it said. “We anticipate further upside as banks’ earnings benefit from lower credit costs, robust loan growth and firmer net interest margins as interest rates rise. Furthermore, we believe there is room for dividends to grow.”
Its Most Preferred stock list for Singapore is Ascendas REIT, CapitaCommercial Trust, CDL Hospitality Trusts, City Developments, DBS, Frasers Centrepoint Trust, Genting Singapore, Mapletree Logistics Trust, ST Engineering, Singtel, UOB and UOL.
Its Least Preferred stock list is HPHT, Singapore Press Holdings and StarHub.
Other regional markets
In a separate note, UBS said it also was Overweight on China’s market on resilient growth.
UBS downgraded Indonesia to Neutral from Overweight after its stocks in that country “underperformed sharply” amid broad market weakness. It also pointed to Indonesia’s vulnerability to U.S. interest rate hikes.
It upgraded the Philippine market to Neutral from Underweight, noting valuations and technical indicators were “less stretched” after the market selloff over the past year. UBS stayed Underweight on Malaysia and Taiwan.
Regionally, over the next six to 12 months, it said it still liked financials and select technology stocks for benefits from a growth and value diversification.