by winston » Sat Nov 29, 2014 10:57 am
Outlook 2015
Modest GDP growth outlook, lower core CPI
We expect Singapore to post moderate GDP growth of 2.5% in 2015, alongside a mild acceleration in global growth to 3.5%. UBS economists expect SIBOR to rise to 1.4%, in tandem with an expected Fed rate hike to 1.25%.
We forecast core CPI to decline to 1.5% on lower commodity prices, weaker growth and a slacker labour market. We expect an end-2015 US$/S$ of 1.32.
Key investment themes for 2015
1) Impact from rising interest rates: our bottom-up analysis suggests a limited impact on corporate profitability, as most companies covered by UBS have locked in a significant proportion of debt at fixed rates and staggered debt maturities.
On banks, we think a comparison to 2000-02 is instructive, as banks were also at the start of the provisions cycle in a choppy growth environment. Bank earnings estimates weathered the start of higher provisions relatively well, but turned markedly weaker in the second year. We expect bank share prices to stay firm in H115, but think they could be vulnerable in H215.
2) The government could ease property cooling measures in H215, serving as a catalyst for developers, which are trading at an average 30-35% discount to RNAV.
3) Weak oil prices: we believe order book, margin and earnings sustainability concerns will remain overhangs on the offshore shipyards through most of 2015.
Our stock preferences
Our top picks are: CapitaLand, CapitaRetail China Trust, Global Logistic Properties, OCBC, Singapore Telecom, SMRT, UOL, Wilmar International
and Yangzijiang Shipbuilding.
Muted FSSTI outlook: 4% growth in 2015E
We set a 2015 target of 3,480 for the FSSTI, and think performance is likely to be stronger in H115 than H215. While we expect net profit growth to
be modest in 2015, valuations are not stretched, in our view. We forecast 9.1% EPS growth for UBS covered stocks in 2015.
Source: UBS
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