SG Strategy

SG Strategy: JP Morgan has strategy report. Note that SG mkt has factored incountry-specific earnings risks and is trading at 13.8x and 12.5x FY11E and FY12E earnings, 5-11% below the 14.5x historical average. House remains overweight on banks and property in Singapore, with underweight positions in industrials and telcos.

Container Shipping: Morgan Stanley has sector report. Note fears of 3Q11 proposed rate hikes and peak season surcharges not being implemented are exaggerated and remain positive on the 2012 industry outlook and believe that fears of recovery in the developed economies rolling over and massive new ship orders impacting 2012 supply growth are unfounded. House continues to favor NOL, CSCL and Hanjin.

SG Strategy: UOB Kay Hian has Strategy Report. Note that should history repeat itself, the potential downside to STI is 2,642-2,880 after the expiry of QE2. See further weakness as a buying opportunity for quality laggards. Add that the jury is still out on whether there could be another QE3 and current consensus thinking is that there is unlikely to be further quantitative easing but we cannot rule this out totally as this is dependent on the extent of US’ economic recovery…..

House key top picks for 2H11 include counters that offer sustainable and high div yields which are (M1, StarHub, CDLH-T), industrial REITs (A-REIT, Cache Logistics, MIT, Sabana REIT), and quality laggard stocks (SIA Engineering, ST Engine, KepLand, OCBC, Ezra). Forecast 2011 GDP growth of 5.7% yoy and 5.0% yoy for 2012.

SG Strategy: Citi has strategy report. Note that STI is -3% Quarter-to-date (QTD) and SG’s earnings revision count indicator has turned down, with negative revisions exceeding positive counts by 10%. Tip that trend should continue to be on the negative side across summer, given concerns on high energy costs and softer export data lately…..

Add that SG however is at strong support levels from a valuation standpoint and should recover into 3Q11. The STI is at 13.5x PER, near to -1 SD from mean and should be a good support level for the market. House reiterate that the US is in a mid-cycle adjustment period and the softer patch of electronics exports and NODX data from Singapore should recover (and bring stocks higher) as we move into 3Q11…..

House recommends switching into defensive names into with the addition of A-REIT and Singtel. Wilmar was added on back of a turnaround at its oilseeds division. Also likes WingTai, KepCorp (-5% QTD) and DBS (-4% QTD). Other notable stock highlights include SIA (for having held up well) and Genting SP (stock price has declined 9% QTD).