International | Jun 15 2006
By Rudi Filapek-Vandyck
Smith Barney Citigroup’s proprietary Recession Indicator is pointing to a likely slow down in the months ahead for the Singapore economy. With the local share market having lost circa 12% over the past month, one would conclude investors are drawing the right conclusions, but Citigroup strategists in Singapore are not so sure.
The strategists acknowledge risks for a sharper than expected economic slow down have increased, but they maintain their belief it won’t be as bad as currently feared by the market.
Recent selling into Singapore’s share market is therefore regarded "overdone" and was, in the eyes of the strategists, likely exacerbated by margin calls, short selling and redemptions. Supporting the view is the observation that local small caps and high PE stocks recorded the heaviest falls.
Citigroup promises it will keep a close eye on the prospective slow down. Meanwhile, it advises investors should screen the market for sustainable high dividend yields and capital management plays. The broker cites ST Engineering, SPH and Comfort Delgro as three prime examples.
Special dividends and capital management are two other factors the broker likes. Citigroup cites SCI, SIA Engineering, Sing Tel and Starhub as key examples. All have announced either special dividends and or capital reductions and Citigroup believes this should provide an additional boost to potential investment returns.
