Strategy by Deutsche: 2H14 outlook

Singapore’s benchmark STI has appreciated 6% YTD. Company specific factors supported the index including: - Olam (Temasek Buyout); - Noble Group (JV on Agri business); - AREIT (index inclusion); - ComfortDelGro (bus reforms). Singapore government long-end bond yields compressed by c.30bps (following US Treasuries) and led the rally in the SREIT sector. The biggest underperformer was Genting Singapore on weakening mass market gaming hold while worries about Sembcorp Marine’s execution of Brazilian drillship contracts remain. In terms of key themes for the rest of the year, Deutsche highlights: 1) LAND TRANSPORT Deutsche believes bus reforms have not been fully priced in. Furthermore, while rail reforms are not imminent, expects them to happen eventually and any announcements will provide upside support. Deutsche has BUYS on both Comfortdelgro and SMRT. 2) PROPERTY Continue to prefer commercial / integrated developers (Keppel Land & OUE). While policy risks for residential property seem to be moderating with government tapering of supply, policymakers still view it too early to relax property cooling measures. 3) EXTERNAL GROWTH Remain positive on non-domestic plays such as PLANTATIONS and GAMING on the back of global growth. 4) SREITs Spreads over 10Y bond yields are 30bps wider than the 290bps historical average . Remain positive on MCT, AREIT and CCT. Current top picks: COMFORTDELGRO, GENTING SINGAPORE, GOLDEN AGRI, MCT, YANGZIJIANG