Singapore: Singapore stocks are most favoured to gain in Asia as the economy sustains its expansion and the currency strengthens, Merrill Lynch and Co. Inc. said. Credit Suisse Group disagrees, downgrading the market to “underweight”.
Merrill raised the weightage for Singapore equities in its model portfolio to 7.9% from 4.7% previously, strategists led by Mark Matthews wrote in a report on Monday. That’s higher than the market’s 5.3% representation on the MSCI Asia-Pacific excluding Japan Index and the most “overweight” among 12 regional markets, the brokerage said.
The Straits Times Index (STI) has dropped 18% this year, outperforming a 23% retreat in the MSCI regional index. The city-state’s economy is forecast by the government to grow by 4-5% this year, after expanding 7.7% in 2007, while its currency has climbed 5% against the US dollar in 2008.
“Singapore offers First World governance for emerging market growth,” Merrill’s report said on Monday. “Monetary policy is conducted through the currency, which we expect to appreciate versus the US dollar by 4% between now and the end of the year.”
That’s not enough to attract Credit Suisse analyst Sean Quek, who on Monday cut his rating on the market to “underweight” from “overweight”, saying that valuations are no longer attractive.
STI is valued at about 14 times current year earnings, the highest in Asia, excluding Japan, after China, Hong Kong and India.
Singapore’s exports will fall this year for the first time since 2001, the island’s trade promotion agency said on Monday, reversing an earlier estimate that exports will grow by between 2% and 4%. Shipments fell 2.4% in the first half of 2008.