Market Outlook: DB cites slowing GDP & earnings growth & tightening policies in 2H are likely to overhang the Spore market near term. Notes while 1H GDP growth beat expectations, 3Q10 performance likely to decline as inventory re-stocking reverses. Expects 2H earnings growth momentum to slow to ~13% vs +0% in 1H10. EPS growth in FY11 also not aggressive at 10%, limiting upside potential. But tourism will continue to outperform.
Prefers defensive stance as STI nearing its 12-month target of 3200, implying 14x FY11 P/E. Top picks - F&N & SCI for M&A potential, SGX for its ADR platform, Keppel Land for recovering office sector, SATS for yield & rising traffic. Also favours Starhub & Suntec for yield play. Top sells - City Dev & SMRT. Also dropping YZJ & Genting Spore as stocks have outperformed.
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