SINGAPORE (Nov 19): Singapore’s corporate earnings and economic growth may be bottoming out as cyclical indicators such as electronics exports show a slower pace of declines, according to Citigroup Inc. analyst Patrick Yau.

Citi’s earnings revision count indicator for Singapore stocks has declined to -50%, bringing it close to the level where it may have reached a trough, Yau wrote in a report on Monday. The city-state’s economic growth is likely to accelerate to 1.7% next year from a projected pace of 0.6% in 2019, he added.

A bottoming in growth expectations and a switch in the trade war narrative would “likely lead us to meaningfully change our stock picks and risk appetite,” Singapore-based Yau wrote.

Citi’s top picks include Singapore Telecommunications, City Developments, Wilmar International and Yangzijiang Shipbuilding Holdings. It’s neutral on banks, with United Overseas Bank as its preferred lender, Yau added.

Results from top companies such as Singapore Technologies Engineering and Sembcorp Industries have trailed expectations as a weak global outlook hurt demand for the city-state’s exports. Twelve-month forward earnings estimates for the benchmark Straits Times Index have fallen 2.7% from a high in July.

But earnings may be poised to rebound, with analysts predicting that a report due Thursday will show the economy expanded 1.4% last quarter after recording its biggest slump since 2012 in the previous three months.

The benchmark Straits Times Index has gained 5.5% so far this year, versus a 4.1% rise in the MSCI Asean Index. The Singapore gauge has been boosted by real estate investment trusts, developers and technology stocks while consumer discretionary and offshore marine shares have been the weakest, Yau wrote.

“While headwinds remain, there is a silver lining, with cyclical indicators bottoming,” he added.