SINGAPORE (July 3): With interest rates likely to remain low until end 2021 as the economy follows a “U-shaped” or “L-shaped” recovery, DBS analysts Yeo Kee Yan and Janice Chua are recommending investors to load up on yield stocks for the foreseeable future. 

“The US COVID-19 resurgence and concern of more outbreaks globally as economies reopen has put a check on the early June rally driven by optimism of a cyclical recovery. There is also a sense of caution heading to the 2Q results season as the full impact of the economic shutdown due to the ‘circuit breaker’ that lasted a little over 2 months will be felt,” they report. 

The positive sentiment following a global reopening did not last long. The Straits Times Index (STI) rallied with a 3.2% increase m-o-m to 2,590 in early June when countries were emerging from their lockdowns, corrected downward following an additional rise in US case numbers in the US. Most European and Asian states -- including Singapore -- had already begun reopening too. Consumer staples led by Wilmar, Thai Beverage and Dairy Farm outperformed, but consumer discretionary stocks underperformed, with Genting and SIA suffering from falling tourism.

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