Singapore Stocks May Slide as Recession Deepens, Says Citigroup
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By Jonathan Burgos
March 5 (Bloomberg) -- Singapore’s benchmark stock index may fall about 20 percent more as the city-state sinks deeper into recession, according to Citigroup Inc.
“Valuations are looking compelling, but the Straits Times Index will not stage a convincing recovery until macro-economic conditions improve more visibly,” Chua Hak Bin, head of research for Citigroup in Singapore wrote in March 4 report.
Singapore’s economy shrank by an annualized 16.4 percent in the fourth quarter, the most in at least 33 years, as the global slowdown weighed on the city-state’s exports.
The Straits Times Index dropped 12 percent this year to close at 1,544.34 as of yesterday, as growth concerns mounted. The economy is likely to slump another 10 percent this quarter and 8 percent in the second quarter, dragging the benchmark index down to 1,200, Chua said.
A decline to 1,200 would bring the average valuation on stocks to 0.7 times book value, the trough valuation during the 1998 Asian financial crisis, Chua said.
The Straits Times index lost 1.7 percent today to 1,517.92 as of 2:42 p.m. local time, and now has a price-to-book value of 0.9 times, data compiled by Bloomberg show.
Earnings downgrades will continue as the economy deteriorates, Chua said. In past recessions, company earnings in Singapore declined over 30 percent and consensus analyst estimates forecast a 21 percent drop this year, he said.
Singapore Airlines Ltd., Neptune Orient Lines Ltd. and CapitaLand Ltd. are Citigroup’s “top sells,” while Singapore Telecommunications Ltd., Singapore Press Holdings Ltd. and Singapore Technologies Engineering Ltd. are its “top buys,” Chua’s report said.
To contact the reporter on this story: Jonathan Burgos in Singapore at [email protected].
Last Updated: March 5, 2009 02:00 EST
Email | Print | A A A
By Jonathan Burgos
March 5 (Bloomberg) -- Singapore’s benchmark stock index may fall about 20 percent more as the city-state sinks deeper into recession, according to Citigroup Inc.
“Valuations are looking compelling, but the Straits Times Index will not stage a convincing recovery until macro-economic conditions improve more visibly,” Chua Hak Bin, head of research for Citigroup in Singapore wrote in March 4 report.
Singapore’s economy shrank by an annualized 16.4 percent in the fourth quarter, the most in at least 33 years, as the global slowdown weighed on the city-state’s exports.
The Straits Times Index dropped 12 percent this year to close at 1,544.34 as of yesterday, as growth concerns mounted. The economy is likely to slump another 10 percent this quarter and 8 percent in the second quarter, dragging the benchmark index down to 1,200, Chua said.
A decline to 1,200 would bring the average valuation on stocks to 0.7 times book value, the trough valuation during the 1998 Asian financial crisis, Chua said.
The Straits Times index lost 1.7 percent today to 1,517.92 as of 2:42 p.m. local time, and now has a price-to-book value of 0.9 times, data compiled by Bloomberg show.
Earnings downgrades will continue as the economy deteriorates, Chua said. In past recessions, company earnings in Singapore declined over 30 percent and consensus analyst estimates forecast a 21 percent drop this year, he said.
Singapore Airlines Ltd., Neptune Orient Lines Ltd. and CapitaLand Ltd. are Citigroup’s “top sells,” while Singapore Telecommunications Ltd., Singapore Press Holdings Ltd. and Singapore Technologies Engineering Ltd. are its “top buys,” Chua’s report said.
To contact the reporter on this story: Jonathan Burgos in Singapore at [email protected].
Last Updated: March 5, 2009 02:00 EST
