Credit Suisse sees upside potential for property developers listed in Singapore
Globally, equity prices have mostly run ahead of fundamentals, it says
June 24, 2017
KENNETH LIM
PROPERTY developers offer upside potential in a Singapore stock market that is already fairly valued, while around the world, "domestic champions" stand to benefit from inward-looking politics, Credit Suisse strategists said on Friday.
The private bank's house view is that continued improvements in Europe, robust fundamentals in the United States and better-quality growth out of China would underpin a modest but steady expansion for the global economy in 2017.
Equity prices, however, have mostly run ahead of fundamentals, making stock investing a matter of finding the sweet spot where reasonable valuations and room for growth meet, said Suresh Tantia, Credit Suisse equity investment strategist for Asia-Pacific.
In Singapore, stocks are trading at about 14.3 times expected year-ahead earnings, putting them near the high end of "fair" territory, he said.
With expectations of a slowdown in export growth ahead, Mr Tantia predicts pressure on manufacturers. Domestic sectors such as retail are already depressed, and may not be affected much.
Property developers, however, still show promise.
"We like property developers, which I think are trading at a substantial discount to net asset value, and the property market seems to be rebounding in Singapore now," Mr Tantia said, adding that the overall expectation for Singapore stocks is a range-bound market.
Looking further out, Credit Suisse described a "supertrend" of a multipolar world as a "disenchanted" middle class in Western countries expresses a desire for more self-centred domestic growth.
"Domestic champions", or companies that have a strong domestic story, such as major domestic employers, may benefit from preferential government policies, said John Woods, Credit Suisse Asia-Pacific chief investment officer. "We think there will be a preference for these types of companies in the coming years, and alongside those, we identify security, defence and these types of names that we think will benefit."
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