SINGAPORE (Nov 29): Maybank Kim Eng is forecasting Singapore’s GDP to moderate to 2.5% in 2018 from 3.4% GDP growth in 2017 on a slowdown in industrial production growth.

Notably the construction sector looks poised for a rebound in 2018 with the en bloc activity in the past couple of quarters.

On other fronts, the most recent data suggests tourist arrivals, unemployment and wages have been incrementally positive too.

In a Wednesday report, analyst Neel Sinha says the third straight quarter of core profit growth has gone a long way in reinforcing sustainability of the somewhat tentative turnaround seen two quarters ago.

Revenue, EBITDA and core profit of Maybank’s stocks universe grew 4%, 14% and 7% y-o-y, respectively.

The macro data continues to support the research house’s growth outlook while earnings expectations are inching up as well.

“We maintain a preference for cyclicals and are positive on property and industrials. Most of our top stock ideas are from these sectors,” says Sinha.

In Maybank’s views, the Street’s profit growth expectation for 2018 is going through an upgrade cycle with the consensus outlook for STI rising 200bps to 10% level over the past couple of months.

“Our core profit growth estimates for 2017/2018/2019 currently stand at 13%/9%/7%, respectively,” says Sinha.

Maybank remains broadly biased to cyclicals on top-down factors of a positive macro growth outlook and profit growth expectation improvements plus bottom-up sector factors for the property rebound to be sustained for another three-four quarters and an inflection point in the outlook for industrials.

Maybank is “positive” on property developers, industrial REITs and industrials. It is “neutral” on financials, office REITs and gaming and “negative” on telecoms and agri-commodities.

Key downside risks to Maybank’s outlook for the current rally to extend through 2018 are external growth or trade headwinds that could derail industrial production and the tech capex upcycle, potential measures to cool the property market and fund outflows from Asean to North Asia, adds Sinha.