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Investment Strategies For 2019

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The IMF recently moderated its global GDP growth outlook to 3.7 percent year-on-year for 2018/2019. The main concerns were trade tensions between the US and China, weaker performances by Eurozone countries and rising rates that could pressure emerging markets with capital outflows. Given Singapore’s open economy and reliance on trade, the STI has been showing lacklustre performance.

As we head into 2019, should investors continue to put faith in the Singapore market or should investors avoid the Singapore market in pursuit of higher yields elsewhere? According to UOBKH, Singapore is still the market to be vested in for Southeast Asia.

Compelling For Yield Seekers

UOKBH notes that value is gradually emerging in the Singapore market after the STI’s year-to-date pullback. The STI is currently trading at a 12 percent discount to its long-term mean price-to-earnings ratio. On a price-to-book basis, the discount is even more pronounced at 24 percent.

From a valuation perspective, STI is trading at a discount to regional peers like ASEAN and Japan. Moreover, STI has an attractive dividend yield of 4.2 percent, much higher than the region’s average of three percent. Leading up to 2019, UOBKH expects yield seekers to be on the lookout for yield plays in the Singapore market.

Concerns Over Economic Outlook

But there are still concerns over the economic outlook for 2019. Similar to the outlook from other brokerage houses, UOBKH is also concerned about the impact of rising interest rates and trade tensions on the global economy. The concern is largely due to external uncertainties as the current growth environment gets murkier from trade tensions, geopolitical risks and high oil prices.

That being said, UOBKH believes that such market condition allows investors to accumulate on pullbacks to re-position for 2019. However, UOBKH warns investors to be discerning as well.

Balancing Blue-Chip Anchors With Catalyst Stocks

UOBKH recommends investors to balance their portfolio with blue chips that could deliver earnings with some upside potential or quality laggards with either strong dividend yields or specific catalysts. This is key in the event of any negative surprises, both from company-specific or macro developments.

In particular, UOBKH thinks that four investment themes are worth considering, namely: Solid Blue-Chip Anchors; Dividends From Cash Machines; M&A Plays; and Refuge In Consumer Stocks. In the next parts of this 5-part series, we highlight the four investment themes that UOBKH recommends for 2019.

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