Singapore stocks may deliver modest returns of just 5–10% over next 6-12 months given prospect of slower economic, earnings growth, says UBS Wealth Management Research, according to Dow Jones.

UBS expects re-stocking activity in developed economies to wane over next few quarters, saying: “Less re-stocking activities, in turn, should lead to lower exports and industrial production growth in Singapore, thus dragging down overall economic growth.”

Research house notes market consensus of 18–19% EPS growth this year, but says much of this already reflected in 1H10. Adds, higher staff costs due to tight labour market also likely to weigh. But says valuations remain undemanding with market trading at 15x 2010 P/E vs 16.6x long-term historical average, while companies’ gearing is low following active equity fund-raising in 2008-2009: “This low gearing level would position Singapore companies well to withstand any future external negative shocks.”

Top picks include Ascendas REIT (A17U.SG), CapitaCommercial Trust (C61U.SG), ComfortDelgro (C52.SG), DBS (D05.SG), Keppel Corp. (BN4.SG).