Strategy: Citi has strategy report for SG. Note that SG’s earnings revision count indicator has turned negative, with hints of a weaker STI, but not pointing to a looming recession as collective net income forecast for STI is holding steady. Negative ERC is likely a normalization of earnings expectations as SG’s economy adjusts to a slower rate of growth of 7% vs 15% last yr….
Inflation is moderating, April’s CPI came in at 4.5%YoY, lower than the peak of 5.5% YoY in Jan. Expect CPI to average 4% yoy for FY11 as a stronger S$ helps dampen imported inflation but negatively impacts exporters and tourism….
Key stock picks are KepCorp as a proxy for rising demand for replacement rigs; DBS Bank as a proxy of banks that have a strong equity base and have enjoyed rising loan growth momentum; Wilmar on the turnaround of its oilseeds unit in 1Q11. Also like A-Reit and Singtel for their attractive dividend yields.
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