Credit Suisse says investors will start to believe in an earnings recovery in 2011 if the year turns out to be like 2005, with a recovery of industrial production momentum and return of confidence.

It would also mean “that stocks that have been winners tend to continue to do well and that is captured by the Price Momentum indicator,” says quant strategist Jahanzeb Naseer.

Adds, Earnings, Price Momentum were the best factors in 2005, generating 15%, 35% returns respectively. “Within the Singapore capital goods sector, Yangzijiang (BS6.SG), Cosco (F83.SG), Sembcorp Marine (S51.SG) screen well on these two factors.”

Keeps Yangzijiang at Outperform, “as we believe it is well-positioned for a recovery in containership orders and has an attractive valuation of 11x forward P/E.”

Keeps SembMarine at Outperform as “the stock will be re-rated as newbuild high spec jackup orders accelerate.” Rates Cosco at Underperform.