Ask The Experts: Singapore Equities Expected to Bottom in Q2 2012
Victor Wong, Fund Manager of United Growth Fund at UOB Asset Management, shares with Fundsupermart his views on the Singapore equity market and why he believes investors can look forward to a recovery in the second half of 2012.
What's your outlook for the Singapore market in 2012?
- 2012 will be uncertain and volatility will be the main feature
- Singapore market is small and exposed to external shocks
- Developments in Eurozone crisis and China's GDP growth will affect outlook for Singapore market
What are the positive drivers of the Singapore market?
- Singapore market, in line with North Asian markets, has corrected quite a bit
- Year-on-year GDP growth for Singapore likely to bottom in first half of 2012
- Historical data shows that Singapore market tends to follow GDP movements; they tend to bottom in the same quarter
- STI currently trades at 2700 points; forecasts for 2012 to be between 2500 and 3100 using PB ratio as a valuation measure
- Equivalent to about 10% downside and 15% upside for 2012
What are the risks investors need to be wary of?
- Unforeseen weaknesses in Europe and US
- Hard landing in China
- To mitigate risks, investors and look towards funds like United Growth Fund which aims to protect investors on the downside by paying out dividends
- In such volatile investment environment, capital appreciation is secondary and dividends provide a steady source of income
- The United Growth Fund endeavours to pay out dividends twice yearly with a yield of about 3-4%
Given the above, how is your portfolio positioned?
- Portfolio is positioned to be able to capture the upside should the Singapore market recovers in 2012, while ensuring a regular source of income for investors in the form of dividends
- Defensive positioning in investments in telcos such as Singtel
- Large holdings in REITs, especially commercial REITs and retail REITs
- Industrial and more cyclical companies such as Keppel Corp to benefit more from recovery and provide stronger capital growth
- Should a recovery take off, the fund will look into the banks and property sector
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