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Morgan Stanley expects ‘sustained rebound’ in Singapore stocks

·2-min read
People walk along promenade during lunch break at Raffles Place financial business district in Singapore on June 15, 2020. - A polled survey from economists and analysts conducted by the Monetary Authority of Singapore (MAS) and released on June 15, indicates Singapore economy is expected to contract by 5.8 per cent this year. (Photo by Roslan RAHMAN / AFP) (Photo by ROSLAN RAHMAN/AFP via Getty Images)
People walk along promenade during lunch break at Raffles Place financial business district in Singapore on June 15, 2020. (PHOTO: ROSLAN RAHMAN/AFP via Getty Images)

By Nick Chang and Ishika Mookerjee

(Bloomberg) -- Morgan Stanley is expecting a sustained rebound in Singapore’s stock market on an imminent recovery in domestic and global growth.

The nation’s economic growth likely troughed in the second quarter, analysts Wilson Ng and Derek Chang wrote in a report Monday. The country boasts some of the highest dividend yields in the world, paying about 4.5%, and could see more fund flows for its “safe haven” status amid geopolitical tensions and regional economic uncertainties, they added.

The investment bank has a target of 1,550 for the MSCI Singapore index for June 2021, implying a 10% gain from Friday’s close.

Singapore is heading for its worst recession ever, as the trade-reliant economy suffers from a double whammy of global lockdowns and U.S.-China tensions. The city-state’s stocks have underperformed most peers in Asia, with the MSCI Singapore Index down 19% this year.

Historically, Singapore stocks bottomed around a month after the start of a recession, based on Morgan Stanley’s research. The bank prefers cyclical sectors such as banks, property and consumer staples that historically outperformed six to 12 months into past recessions.

Negative Rate Benefits Seen Limited for Singapore’s Stock Market

“We overlay this with our preference for high and sustainable dividends, which are likely to benefit from incremental inflows,” they wrote.

Other highlights in the note:

  • The market is looking past the current economic weakness and shifting “focus instead to an imminent V-shaped recovery in the global economy,” the analysts said.

  • The Southeast Asian country is among the Morgan Stanley’s preferences in Asia.

  • Its preferred stocks include United Overseas Bank Ltd., City Developments Ltd., Ascendas Real Estate Investment Trust and Wilmar International Ltd.

© 2020 Bloomberg L.P.

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