ASIAN STOCKS RALLIED on Friday after three days of losses, after better-than-expected employment and manufacturing data out of the US. In Singapore, better-performing exports in November also boosted market sentiment. Non-oil domestic exports rose 1.6% from a year ago, helped by stronger shipments of pharmaceuticals. By midday, the Straits Times Index in Singapore was up by 0.4%.

 

However, analysts caution that the outlook for 2012 will remain cloudy and more economic and corporate earnings downgrades are to be expected in the coming months. Additionally, while the recent selldown has brought stock prices to a reasonable level, the lack of investor confidence is going to limit any gains. “The preference for safer assets will continue, and defensive and good dividend yielding stocks will remain in favour,” the OCBC Investment research team notes in a new report.

 

Among analysts’ preferred sectors is telecommunications -- the three main telcos Singapore Telecommunications, M1 and Starhub -- which although will not be immuned to a market selldown, is expected to outperform the index on a relative basis, given their defensive earnings and attractive dividend yields. Growth is set to be driven by higher mobile data usage given the proliferation of smartphones and tablets. “However, the key challenge for operators here is how to monetise this seachange in consumption patterns,” writes OCBC analyst Carey Wong in a recent report.

 

Additionally, the islandwide-rollout of the Next Generation National Broadband Network (NBN) is expected to result in more subscriptions to the fibre network, although this would be more gradual than exponential given the uncertain economic environment’s impact on spending.