With bonds unlikely to fare well amid rising interest rates, the investment environment unfriendly for property, SGD gains taking care of themselves and commodity prices at multi-year highs, DBS Vickers says that leaves equities “as an attractive choice for investors given the market’s average valuation and ’pro-equity investment’ policies.” 

It notes, the STI currently trades at slightly below the 10-year average valuation of 14.6X FY11 earnings. “Thus, valuation is not stretched and the index remains at some 17% below the 2007’s peak of 3875. There is no ’policy risk’ for equities. In fact, the implementation of all-day trading from March will enable the Singapore stock exchange to keep pace with competition from other Asian stock exchanges.” 

 

The house’s preferred themes are Singapore banks, oil & gas (yards) and laggards with potential catalysts this year. It adds, “avoid, in general, downstream food suppliers because their profit margins will be vulnerable to rising food prices going forward.” 

 

The STI is off 1.2% at 3189.82.