“We advocate investors to consider medium- to long-term positions in the recent ‘fallen angels’"
Singapore’s projected calendar year (CY) 2022 aggregate net profit growth of an estimated 30% compared to pre-Covid levels in 2019 will be a “tall order” to beat in CY2023, amidst slower economic growth, says CGS-CIMB Research.
In Dec 9, analyst Lock Mun Yee notes that the benchmark $FTSE Singapore Straits Time Index(.STI.SG$ was one of the best performers in the region in 2022, with a 4.1% rise year-to-date (ytd), as the economy shook off the effects of the Covid-19 pandemic and borders reopened.
Should the rate pivot come into play towards end-FY2023, she says the market may adopt a more risk-on strategy and look for companies with strong growth potential. “We advocate investors to consider medium- to long-term positions in the recent ‘fallen angels’ — companies with strong competitive edge, good growth prospects and which are trading at cheap valuations — such as $Nanofilm(MZH.SG$ , $YZJ Shipbldg SGD(BS6.SG$ , $Sea(SE.US$ and $TDCX Inc(TDCX.US$ .”
Aside from these companies, Lock’s key themes are a pause in interest rate hikes, size and scale and China re-opening plays. She is anticipating the rate upcycle to pause after a hike in 1HFY2023, while her STI target for 2023 is 3,350, pegged to 1.5 standard deviations (s.d.) below mean.
“Our theme for 2023 is to look for sectors that can benefit from a pause in rate hikes, such as S-REITs. We think timing the rotation is key,” says the analyst.
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