Photo: Bloomberg

With Singapore currently under Phase 2 (Heightened Alert), Singapore Exchange-listed companies could see a deterioration in earnings for the next results season.

CGS-CIMB Research says the “blip of Phase 2” could see the earnings per share (EPS) upgrades of SGX-listed companies taper in 2Q 2021.

“Notably, banks, which typically drive the market EPS, may be more conservative in their assessment of asset quality amid the resurgence of Covid-19 cases in the region with the risk of loan moratoriums being introduced,” CGS-CIMB’s head of research writes in a note dated May 31.

Nevertheless, the brokerage notes that the Straits Times Index EPS growth should still sustain at 42% for FY2021 and 14% for FY2022.

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SEE: Singapore's stock rally stalls after return to Phase 2 measures

With most companies having already released their financial statements for 1Q 2020, CGS-CIMB points out that it was positively surprised by the performance of companies within its research universe.

The brokerage says 19 companies performed above its expectations, compared to nine that underperformed.

Meanwhile, 32 companies performed within expectations.

Going forward, CGS-CIMB says its top picks will revolve around the themes of reopening, defensive, growth, restructuring and valuations.

The brokerage has reiterated its “overweight” recommendation on a list that comprises banks, property developers, selected REITs and capital goods companies.

It has now included transport and healthcare companies to that list.

The brokerage, however, has downgraded telco and construction companies to a “neutral” rating.