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A Guide To Navigating Asia’s Investment Landscape In 2018

Lim Si Jie

For investors who are looking to invest in Singapore (SG), China (CN) and Malaysia (MY) in 2018, here is a quick guide to investing strategies that DBS recommends in the three markets.

Investors Takeaway: DBS’ Guide To Investing In SG, CN and MY In 2018

SG: One Of The Few Markets With Undemanding Valuation

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Singapore remains one of the few regional markets where the benchmark (Strait Times Index) is still trading below its all-time high. Singapore market’s 12-month forward price-to-earnings ratio is still trading below 1 standard deviation, which is relatively attractive compared to the region. DBS predicts that STI could attempt to hit 3,688 by end-2018, representing around ten percent total return, inclusive of dividends.

DBS’ Investment Strategies To Invest In Singapore

DBS’ top picks in Singapore for the year ahead are centred on five themes: Growth At Reason Price or GARP in short, recovery in oil and gas, beneficiaries of higher interest rates, tech sector and rotation into proxies to a mid-cycle economic cycle. DBS favours the banks, property, consumer goods as well as the offshore and marine sectors to ride the broad-based recovery as well as rising oil prices.

CN: Follow Xi Jinping’s Lead

The storm surge in Shanghai Lujiazui financial district,this picture can be used in car ads,real estate ads,finance ads and tourism ads.

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As President Xi Jinping starts his second term, the investment case for Chinese equities remains strong. After witnessing China’s growing dominance in world affairs and strong grip on domestic issues, confidence in the Chinese economy should stay strong.

DBS notes that the allure of cheaper valuations versus the rest of the region (especially India) should continue to attract International fund to flow into Hong Kong-listed Chinese stocks.

DBS’ Investment Strategies To Invest In China

DBS recommends investors to stay overweight in China and Hong Kong through HSI, MSCI China, MSCI Hong Kong and ‘H’-shares as China enters a new era under President Xi. Investment themes should revolve around Xi’s “Belt Road Initiatives” and the Xiong‘an Area and Greater Bay Area. New economic sectors, new technology, e-commerce platforms, as well as clean energy targets are also recommended investment themes.

In terms of sector, DBS highlights Chinese insurers, banks, Internet, telco equipment, and education as key sectoral picks that are supported by long-term Chinese policies. These sectors are in line with President Xi’s policy guideline to provide “a better life” that focuses more on the quality of growth instead of the quantity.

MY: Be Patient For A Turnaround

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Despite a surprisingly strong GDP growth, Malaysian equity market failed to deliver as earnings lagged expectations. Apart from lagged earnings, downbeat consumer sentiment also led to Malaysian equity market’s failure to re-rate. However, DBS believes that this is expected to change going into 2018.

An election-friendly Budget 2018, the lagged effect of strong economic growth, strong external demand, recovering crude oil prices, and a recovery in consumer sentiments ahead of the 14th general elections (GE14) are expected to be game-changing drivers for Malaysia’s equity market.

DBS’ Investment Strategies To Invest In Malaysia

There are four investment themes that DBS recommends in Malaysia: Cyclical recovery in loan growth and interest-rate hike, cyclical global oil and gas capex recovery, sustained electrical and electronics exports, and tourism.

Based on the four investment themes, DBS recommends taking overweight positions in banks, electronics manufacturing sector, the oil and gas sector, and selective tourism plays as well as the healthcare sectors. In particular, DBS is positive on Malaysia’s healthcare sector on recovery prospects as well as the increased budget allocation by the government in Budget 2018 to grow the medical tourism segment.