SG Strategy: Citi has comprehensive Strategy report for SG. Not that strong growth and loose monetary conditions have propelled price expectations and policy makers have started to weigh in as they grapple with inflation. House note that more downgrades than upgrades have been registered recently, which is likely a normalization of earnings expectations as SG’s economy adjusts to slower rate of growth of 5.5% in 2011 ….
Note that current valuations are attractive and economic cycle remains positive - Impact from the Japanese earthquake has dampened the STI Index, which has declined 8% YTD and now trades at 13.5x 12-mth forward P/E, below mean of 15x P/E and -1 deviation away from mean. Surveys of growth indicators remain supportive of an intact growth phase, which implies that current market weakness is an attractive entry point …..
House likes big cap stocks that are mid-to-late economic-cycle plays and key top picks are rig builder KeppelCorp as a proxy for rising demand for replacement rigs; DBS as a representative of banks here that feature a strong equity base and have diversified earnings base; and GLP and SIA on attractive valuations. Also see value in real estate developers, such as WingTai, which is near the bottom end of its trading range, similar to past crisis points.
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