SINGAPORE (Jan 2): RHB Research prefers to stay selective and defensive amid growth uncertainties in 2019.
The Straits Times Index (STI), down 12% in USD terms, could remain under pressure this year amid slowing GDP growth and an uncertain trade outlook due to China-US tensions.
In a Wednesday report, analyst Shekhar Jaiswal says, “While 12.6x forward P/E and 4.2% dividend yield make the STI’s valuations look compelling, we recommend investors stay selective and focus on buying stocks offering stable earnings, strong balance sheets, and sustainable dividends.”
Amid the uncertain economic outlook and elevated market volatility, the analyst prefers defensive sectors, such as consumer and industrial.
Jaiswal also prefers to focus on a bottom-up stock picking strategy:
“While stocks could certainly move lower-to-sideways from here, we believe this is not a time for investors with long-term horizons to abandon risk assets. We view the current sell-off in the Singapore market as an opportunity to buy into defensive sectors – we define defensive stocks as ones with strong balance sheets, stable earnings growth, high but stable dividend yields, and low historical propensity for big price declines,” says Jaiswal.