Return on equity for Singapore market forecast to increase to 12.7% in 2011, 13.1% in 2012 from 11.5% this year, but could rise further if companies become more aggressive in managing capital, says Credit Suisse.

“We expect Singapore companies to revisit capital management activities in 2011, as confidence recovers further and their cash positions continue to pile up.”

Says some companies, especially those with FY ending March, have already started increasing interim dividends or even raised payout ratio.

Cites SIA’s (C6L.SG) recent $0.20/share interim dividend, SingTel’s (Z74.SG) enhanced payout ratio of 55%-70% vs 45%-60%. Says implied payout ratio of 48% for Singapore market in 2011 still seems conservative vs historical levels (52% in 2009, 77% in 2005).

Overall, advocates Overweight position on stocks in capital goods, property, transport sectors, Underweight on telecom, consumer discretionary industries. Top picks include SembMarine (S51.SG), NOL (N03.SG), CityDev (C09.SG), Keppel Corp. (BN4.SG).