RHB Group Research analyst Shekhar Jaiswal has a sanguine outlook for Singapore equities in 2022, despite uncertainties caused by the emergence of the Omicron variant.

“While the emergence of the Omicron variant will create volatility, we believe Singapore offers opportunities to accumulate stocks that leverage on economic re-opening, and counters that now offer better earnings visibility despite macroeconomic risks,” Jaiswal says in a Dec 17 research note.

The way he sees it, Singapore’s economic reopening is an eventuality, underpinned by the government’s reiterated commitment to continue living with the virus, as well as the ramping up of healthcare capacity and rollout of vaccination booster doses.

“We maintain the slow reopening of the economy will sustain over the next 12 months,” Jaiswal says.

Noting that the Straits Times Index (STI) saw a sharp correction amidst the Omicron outbreak, Jaiswal remains constructive on the STI’s outlook going into the new year, though believes it will be “a slow grind” as investors await clarity on the situation.


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“For 2022, Singapore’s equity market outlook will depend on how well companies will deal with a bumpy economic recovery, elevated inflation risk, expectations of an early interest rate hike and corporate efforts to maximise operational efficiencies,” he explains.

Nonetheless, he highlights that the STI’s earnings outlook indicates growth, with the consensus forecast for STI’s 12-month forward earnings per share upgraded by around 27% since September 2020.

However, he also points out that forecast upgrades have tapered down since the end of 1H2021, in view of inflationary risks from higher commodity prices, input costs, and supply chain disruptions that are likely to weigh on corporate earnings in the near term. 

“In line with normalising economic growth, we estimate the STI earnings to grow by circa 12% in 2022 [compared to consensus estimates of 10%],” he remarks.


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He also notes that valuations remain compelling, with the STI’s forward P/E ratio of 12.7 times currently below its historical average. “STI also remains amongst the cheapest market in Asean,” Jaiswal adds. Meanwhile, its forward yield of 4.4% is also the highest in Asia. 

He has an end-2022 STI target of 3,440 points, based on an end-2022 P/E ratio of 12.5 times.

Jaiswal favours exposure to banks, consumer, healthcare, industrial, telecom and transport sectors. He also continues to favour exposure to REITs, with industrial REITs as the preferred pick. 

His top picks for mid-to-large cap stocks include Ascendas REIT, City Developments, ComfortDelGro, DBS Group, ESR-REIT, Genting Singapore, Raffles Medical, Singtel, ST Engineering, Suntec REIT, Thai Beverage, UOB and Venture Corp.

For small-cap stocks, his picks include China Aviation Oil, Food Empire, Frencken Group, HRnet Group, Marco Polo Marine, and Prime US REIT.

As at 3.15pm, the STI is up 15.43 points or 0.5% higher at 3,088.40 points.

Cover photo: Bloomberg