Business Times - 16 Aug 2011
Why 2011 won't be a rerun of 2008: Citi
By KELLY TAY
WHILE Citigroup has acknowledged that 2011 may bear similarities to the 2008/2009 global financial crisis, it says it is not expecting a repeat of 2008.
Said Citi in an equity strategy report: 'The global financial crisis was sparked by an acute credit crisis while the ongoing developments are linked to risks of a prolonged period with anaemic growth among developed markets. This time, expectations are lower with the STI (Straits Times Index) already at lower valuations as the rout started.'
Still, with a high chance of a technical recession in the third quarter, Citi has lowered its 2011 Singapore GDP growth forecast from 7 per cent to 5.7 per cent. This follows quickly on the back of a cut in its forecast for US GDP from 2.3 per cent to 1.7 per cent.
'A weaker US will likely weigh on Singapore's manufacturers as well as trade-related services. Sentiment-sensitive sectors could also be hit by reduced confidence from the drastic volatility in global equity markets,' said the report.
Citi's bottom-up STI target is 3,440 - about 20 per cent higher than current levels of around 2,800. Following the global selloff for equities sparked by the downgrade of US sovereign credit, Citi also said that the STI - which has fallen 9.6 per cent in August - was among the worst hit in the region, together with Korea and Taiwan.
'With the expectation of still positive global GDP growth and tight corporate cost controls, the pullback in stock prices may have been too severe,' said the report.
Citi said in the current volatile environment, its preference is for large-cap stocks with low growth expectations into 2012, so as to minimise the risk of earnings disappointments. This is opposed to a fully defensive suite of dividend-centric names, given Citi's expectation of positive GDP growth in 2012.
Its key stock picks include Ascendas Reit and SingTel for their attractive dividend yields, and Wilmar on the sustained turnaround of its oilseeds unit. Among banks, DBS is its top choice, thanks to attractive valuations and a dividend yield nearly double that of Singapore government bond yields.
Genting Singapore has been added in replacement of Keppel, since the latter's possibility of slower orderbook growth in 2012 could present risk. The report highlighted that Genting's valuations are attractive at a 20-plus per cent discount to Macau-centric names, due to Resorts World Sentosa losing some market share to Marina Bay Sands. It also noted that gross gaming revenue in Singapore is still likely to grow 10 per cent in 2012, from an estimated US$5.4 billion in 2011.
Citi also continues to prefer Singapore Reits over developers, given the current uncertain economic environment. 'Despite attractive valuations, continued policy risk implies that it remains difficult to suggest picks within the real estate developer space,' it said.
Instead, Citi's preference is for Reits that are operationally more defensive, including retail Reits such as Mapletree Commercial Trust and Fraser Centrepoint Trust, where passing rental rates are below market ones.
The report noted ongoing risks including weaker consumer spending due to dampened sentiment, a prolonged soft patch in electronics exports, as well as margin erosion from a strong Sing dollar.
Despite a 15 per cent fall in headline commodity prices since the recent peak in April, Citi said that it 'remains concerned on risks from inflation', with expectations that this year's consumer price index will average 4-5 per cent year on year, even as a record strong Sing dollar helps to dampen imported inflation.
In a separate Pan Asia equity strategy report, Citi said investors will see total returns of 9.6 per cent per annum, if the Singapore equity market returns to its average price-to-book value ratio in the next three years. If this happens in five years, the annualised total returns would stand at 6.8 per cent.
Source/转贴/Extract/Excerpts: www.businesstimes.com.sg
Publish date:16/08/11
Why 2011 won't be a rerun of 2008: Citi
By KELLY TAY
WHILE Citigroup has acknowledged that 2011 may bear similarities to the 2008/2009 global financial crisis, it says it is not expecting a repeat of 2008.
Said Citi in an equity strategy report: 'The global financial crisis was sparked by an acute credit crisis while the ongoing developments are linked to risks of a prolonged period with anaemic growth among developed markets. This time, expectations are lower with the STI (Straits Times Index) already at lower valuations as the rout started.'
Still, with a high chance of a technical recession in the third quarter, Citi has lowered its 2011 Singapore GDP growth forecast from 7 per cent to 5.7 per cent. This follows quickly on the back of a cut in its forecast for US GDP from 2.3 per cent to 1.7 per cent.
'A weaker US will likely weigh on Singapore's manufacturers as well as trade-related services. Sentiment-sensitive sectors could also be hit by reduced confidence from the drastic volatility in global equity markets,' said the report.
Citi's bottom-up STI target is 3,440 - about 20 per cent higher than current levels of around 2,800. Following the global selloff for equities sparked by the downgrade of US sovereign credit, Citi also said that the STI - which has fallen 9.6 per cent in August - was among the worst hit in the region, together with Korea and Taiwan.
'With the expectation of still positive global GDP growth and tight corporate cost controls, the pullback in stock prices may have been too severe,' said the report.
Citi said in the current volatile environment, its preference is for large-cap stocks with low growth expectations into 2012, so as to minimise the risk of earnings disappointments. This is opposed to a fully defensive suite of dividend-centric names, given Citi's expectation of positive GDP growth in 2012.
Its key stock picks include Ascendas Reit and SingTel for their attractive dividend yields, and Wilmar on the sustained turnaround of its oilseeds unit. Among banks, DBS is its top choice, thanks to attractive valuations and a dividend yield nearly double that of Singapore government bond yields.
Genting Singapore has been added in replacement of Keppel, since the latter's possibility of slower orderbook growth in 2012 could present risk. The report highlighted that Genting's valuations are attractive at a 20-plus per cent discount to Macau-centric names, due to Resorts World Sentosa losing some market share to Marina Bay Sands. It also noted that gross gaming revenue in Singapore is still likely to grow 10 per cent in 2012, from an estimated US$5.4 billion in 2011.
Citi also continues to prefer Singapore Reits over developers, given the current uncertain economic environment. 'Despite attractive valuations, continued policy risk implies that it remains difficult to suggest picks within the real estate developer space,' it said.
Instead, Citi's preference is for Reits that are operationally more defensive, including retail Reits such as Mapletree Commercial Trust and Fraser Centrepoint Trust, where passing rental rates are below market ones.
The report noted ongoing risks including weaker consumer spending due to dampened sentiment, a prolonged soft patch in electronics exports, as well as margin erosion from a strong Sing dollar.
Despite a 15 per cent fall in headline commodity prices since the recent peak in April, Citi said that it 'remains concerned on risks from inflation', with expectations that this year's consumer price index will average 4-5 per cent year on year, even as a record strong Sing dollar helps to dampen imported inflation.
In a separate Pan Asia equity strategy report, Citi said investors will see total returns of 9.6 per cent per annum, if the Singapore equity market returns to its average price-to-book value ratio in the next three years. If this happens in five years, the annualised total returns would stand at 6.8 per cent.
Source/转贴/Extract/Excerpts: www.businesstimes.com.sg
Publish date:16/08/11
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