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Things are looking up for Singapore's economy and stock market: RHB analysts

·2-min read

Analysts from RHB have penciled a 4% y-o-y growth rate for Singapore’s Gross Domestic Product (GDP) this year.

Analysts from RHB have penciled a 4% y-o-y growth rate for Singapore’s Gross Domestic Product (GDP) this year.

“As Singapore continues its efforts to inoculate the remaining population, and press forward with the reopening of the economy – particularly in terms of revitalizing the struggling travel-related sector – contributions to GDP growth from the various sectors will become less lopsided and the recovery will be more broad-based,” Alexander Chia, Andrey Wijaya, Kasamapon Hamnilrat and Shekhar Jaiswal write in a Jan 13 note.

The analysts predict that growth will be propelled by domestic demand, thanks to an easing of restrictions and better export numbers for companies.

For instance, sustained demand for trade-related and modern services are expected to bring firm growth for these sectors.

This is despite predictions of a moderation in growth from the city-state’s major trading partners such as the US and China, reckon Chia, Wijaya, Hamnilrat and Jaiswal.

However, they quip that “external demand from countries across the region should provide support [for Singapore’s economy] as economic activities resume at a faster pace for the year”.

Similarly, pent-up demand for private consumption is expected to support the republic’s growth in 1H2022 as social restrictions ease.

This comes amid a stronger rollout of booster shots as well as improving labour market conditions, note Chia, Wijaya, Hamnilrat and Jaiswal.

In this time, Singapore’s CPI (consumer price index) forecast remains elevated at 2% no thanks to stronger-than-expected cost-push price pressures.

Against this backdrop, the analysts believe that corporate earnings in 2022 “will depend on how well companies deal with an uneven economic recovery, elevated inflation risk, expectations of an early interest rate hike and corporate efforts to maximise operational efficiencies”.

Opportunities for investors lie in stocks that leverage on the economic re-opening ass well as those that offer “better earnings visibility despite macroeconomic risks,” says Chia, Wijaya, Hamnilrat and Jaiswal.

The team has a liking for counters like: banks, consumer, industrials, telecom and transport. They are also looking at REITs that have an exposure to the industrial sector.

To this end, the analysts’ predict that the Straits Times Index (STI) will hit 3,440 points at the end of the year. This is based on 12.5x end-2022 P/E.

Cover image: file photo

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