Singapore stock market predictions 2012

Singapore stock market predictions 2012 ; Singapore banks and telcos have been pitched as safe bets for investors in 2012, away from more volatile sectors such as commodities and property.

Analysts expect the wider market to dip further in 2012, before a rebound in the later part of the year. A decline of 16 percent this year makes the Singapore stock market the worst performer in Southeast Asia. It is about on par with Japan's decline, but not as steep as those in Hong Kong, India or mainland China.

Company valuations have suffered in line with the slide, with Singapore shares trading at around 1.2 times book value - that is now below the four-year average of 1.5 times, according to OCBC Research.

At the height of the 2008 financial crisis, the historical price-to-book value was 1.6 times on average.

Residential property developers are expected to remain under pressure following recent unexpected cooling measures by the government and slower foreign investment.

Offshore industries such as shipping may also continue to be depressed from slowing global trade.

Thus defensive, dividend-yielding stocks are commonly recommended.

Steve Brice, chief investment strategist at Standard Chartered, said: "We won't get a hard landing - there's a significant possibility of that, but the central scenario of a 60 percent probability is this: we'll muddle through an economy where we'll see sluggish growth, but not outright recession.

"And in those environments, dividend yield is very important, being paid for owning stocks or any assets is very important to our performance, and that's why we like telcos."

"On the other hand, we don't really like financials at this stage."

Still, Singapore's banking stocks hold great appeal to others.

Kelvin Tay, chief investment strategist at UBS, said: "If you're assuming a similar dividend payout ratio and no sharp fall in profitability where the Singapore banking sector is concerned, I think valuations in terms of dividend yield stocks are actually yielding between 4.5% and 5%, so it's actually very, very attractive compared to your current cash deposit rates."

OCBC Bank is also overweight in both banking and telcos, with DBS, UOB, M1, SingTel and StarHub being included in stock picks for 2012.

Receiving a reasonable dividend offers some protection in a market so open to swings of the international economy.

UBS' Tay added: "Singapore economy is very largely dependent on exports... Exports to the eurozone area comprise about a quarter of our exports as well, and therefore if there's a slowdown in the eurozone economies, Singapore's economy will be affected.

"In fact, we believe there will be a recession in the eurozone next year - about minus 0.7 percent... The Singapore stock market could actually fall anywhere between 30 to 35 percent before it actually hits the bottom."

There is also the risk that European banks, under pressure to boost capital, will pull investments from their Asian operations.

While that is a potential risk for Singapore's economy... some experts say the country's inherent strengths will put it in good stead.

Jason Hughes, head of Premium Client Management, IG markets, said: "The valuations of some of the Singapore stocks and their exposure in the region in terms of their overall business models do mean you could well see investors looking to Singapore as a nice, relatively safe bet for 2012 and further into 2013."

If there is one consistent mantra among fund managers and analysts, it is to look for the long-awaited upswing in the second half of 2012.

Hughes said: "Telcos have been very robust in 2011 and that's likely to remain the same. Strong EPS into the new year and that's likely to be reflected in share price and investor confidence in 2012.

"We're likely to see telecommunications looking at around 10 percent (firmer) over the year which is relatively in line with how some of the names have done this year. Others have remained flat over the year, but the bigger names like SingTel have underperformed the sector, but we're likely to see them improve over the year in 2012.

Tay added: "The other challenge going into 2012 is inflation. The inflation numbers that came out over the last couple of days have shown that inflation did not slow down despite the fact that the economy has actually slowed down.

"So in other words, we could be experiencing a mini stagflation of sort, where the economy is actually not growing as strongly, yet we have stronger than expected inflation.

"So the easing of the Sing dollar by the MAS is not a foregone conclusion. The Singapore dollar could appreciate given the fact that Singapore inflation is high so we believe the Sing dollar could appreciate at the end of 2012 against the US dollar." For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today

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