What and Where to Invest in 2018: Singapore Equities 2018 - Beyond Expansion, Towards Sustainability
Lai Yeu Huan, Senior Portfolio Manager of Nikko Asset Management Asia Limited shares his views on Singapore equities in 2018.
1. What is your outlook for Singapore equity market in 2018? And in your opinion, what are the catalysts for Singapore equity market this year?
Mr Lai is positive of the Singapore market in 2018. After the gains in 2017, he has a moderate expectation for the Singapore equity market as valuation is higher now. In terms of catalyst, he thinks that the main catalyst is still an improvement in earnings expectations. Earnings expectations has started to improve in the early part of 2017 as the global economy and global trades began to turn up. In addition to that, he sees that the domestic economy is also picking up steam, as evidenced by the pickup in property transactions and the improvement in retail sales. As such, he is positive on the Singapore equity market.
2. Which are the sectors or themes that you prefer?
He thinks that it will be a good year for stock- and sector-picking. He thinks that the returns for the stocks and sectors will be more bifurcated this year. In terms of sector, he likes the cyclical sectors this year such as technology, property, consumer discretionary, and capital goods. He is still cautious on sectors like telecoms and transportations which are more challenged with domestic competition and disruption to their business models. In terms of themes, we continue to like the ânew Singaporeâ which are companies that reinvent their businesses to be able to take on the challenge of the new economy. These companies are in the industries of tech, data, health care, logistics as well as services. He also likes the corporate restructuring theme this year as companies will continue to restructure or undertake merger and acquisition in order to take advantage of the improving economy.
3. What do you think would be the headwinds for the Singapore economy and its equity market this year?
One of the key risks is the monetary policy and interest rates and whether the global central banks as well as the Monetary Authority of Singapore will tighten their monetary policy and this is dependent on the rate of inflation. Fortunately, inflation is still quite benign. Hence, the impact is still quite well managed. Also, the pace of monetary tightening has been quite well communicated to the investment community. He thinks this will mitigate the impact of higher interest rates.
4. How has Nikko AM Singapore Dividend Equity Fund performed compared relative to its peers?
Nikko AM Singapore Dividend Equity Fund is doing quite well. It is one of the best performing funds among its peers over the 1-year and 3-year periods and it is the best performing fund over 5 years. He thinks the performance is due to their bottom-up stock picking approach as well as the fundâs construction of having dividend anchors which are stocks that give attractive dividend yields together with dividend growth which are stocks which have strong growth potentials.
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