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Singapore slips, rated neutral

By Romesh Navaratnarajah: Due to a lack of earnings growth and soaring costs due to economic restructuring, Singapore's rating has slipped from 'overweight' to 'neutral', according to a report from CIMB Research which was reported in The Business Times.

"Within the Singapore market, our main recommendation is to drift out of yields and hunt for safe growth at a reasonable price," CIMB noted.

It added that the break-up of the Eurozone is less likely while fears of a Chinese hard landing were receding.

The brokerage favours companies that benefit from asset inflation. Among them are CapitaLand Ltd and DBS Group Holdings, while UOL Group Ltd is cited as another asset play that trades at a good discount to its restated net asset value.

With target prices of S$17.36, S$8.44 and S$4.02, CIMB provided outperform ratings on DBS, UOL and CapitaLand respectively.

CIMB also advises investors to take a small position on beaten-down cyclicals as defensive stocks are now more expensive.

The city-state faces inflationary pressures as negative interest rates result in higher asset prices and rents. Moreover, the restriction on foreign labour adds to manpower costs which likely impacts corporate earnings. Romesh Navaratnarajah, Senior Editor of PropertyGuru, wrote this story. To contact him about this or other stories email  Related Stories: S'pore inflation down on lower house price growthWorries over sluggish Singapore economy

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