KEY POINTS 
■ STI ? 3150 support despite last week?s decline, 3290 view intact but delayed beyond this year end
■ Banks are a proxy to Singapore GDP recovery Midas & China Merchant to ride on improving sentiment towards China
Wired Weekly
We continue to see the prospect for the STI to head higher towards 3290 despite its 29pt decline last week. But, the likelihood of this happening looks to be delayed beyond the year-end lull period.
Straits Times Index (Daily) |
The short-term support levels for the index are 3150 and 3100. With the STI currently trading closer to 13.12x (-0.5SD) FY14F PE at c.3100 and GDP forecasted to improve next year, there is not much more that the STI can dip if the rest of the world continues to stay firm. Unless global equities slip into a correction, we expect the first support level at 3150 to hold firm. 
  GDP growth for 2014 should register 4.0%, which is at the top end of the newly announced official GDP forecast range of 2.0-4.0%. Singapore banks are a proxy to the country?s GDP recovery. Our pick is OCBC.
The OECD lowered global growth forecasts for 2013 and 2014 to 2.7% and 3.6% respectively, adding that growth should pick up to 3.9% in 2015. There is the possibility of " significant financial instability" in emerging economies, especially during the exit from unconventional monetary policies in the US. China is an exception. Annual economic growth is likely to accelerate to 8.2% in 2014 from an expected 7.7% this year, driven by stronger domestic demand.
  Stocks with China exposure that we like are Midas and China Merchant. Midas is a recovery play on expectations of more high speed bullet train contracts while China Merchant is a dividend play in addition to offering strongest growth driven by acquisitions. (Read Report)