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2013 Market Outlook And Stock Picks: Experts’ Favourites
Perspective | 04 January 2013
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In this special two-part feature to kick-start 2013, we have invited market experts to share their views on the market outlook for the Asian markets and our local bourse. Beyond that, the Shares Investment team and the experts will also be identifying potential performers in the stock market this year.

After a tumultuous year in 2012 that had seen the stock markets exhibit wild swings on the woes of the European debt crisis, slowing growth in US and China, major indexes have, nonetheless, been seen moving to higher grounds in recent rallies.

However, the global economy is hardly in a better shape as gross domestic product projections around the globe have remained low and many blue-chip companies have not registered significantly higher earnings. With the global economy expected to remain fragile, how will 2013 pan out for the Asian stock markets?

Sharing his views with Shares Investment in an exclusive interview, Professor Chan Yan Chong commented, “Volatility is likely to remain in the stock markets for 2013 as the global economy has yet to recover and the rising stock market performance has been due to the excess money in the market following the numerous stimulus measures churned out in 2012.”

“The policy easing trend is likely to continue with more central banks putting forth easing measures to excite the economy, especially Japan and China,” Professor Chan added. Highlighting Japan as the world’s third largest economy, he remarked that newly elected leaders of the Liberal Democratic Party are likely to introduce more monetary easing in the market in order to combat the ailing economy it faces and the Japanese yen has weakened on such expectations.

“Unlike Japan which faces a contracting growth, China’s tight monetary policies have been due to the high inflationary pressures in the country. However, with its economic indicators showing declining results and rising production costs, China could also be introducing easing measures when its new leaders take over in March 2013.”

Professor Chan, however, cautioned that while markets could continue in an upward trajectory in anticipation of China’s new policies, it may experience a correction if the policies are not realised and if the market moves up too quickly, a new bubble might form.

Turning to our local market, Professor Chan noted that the Straits Times Index (STI), although predominantly tracking the US market movements, is becoming more and more influenced by the Asian markets which have been shifting focus to the developments of the China market. Also, he added that with the US stock market approaching 2007-highs, investors may find the valuations too high and the hot money could in turn, flow into the Asian region and drive up indexes here.

With the markets expected to trend upwards this year as highlighted by Professor Chan, how should investors ride on this wave without getting trapped in the volatility that will be here to stay? Read on to find out what three other market experts, Gabriel Gan, Willie Tan Yi Li and Collin Seow, have to say about our local market outlook and their favourite picks this year as they share their insights with us.

Shares Investment: What is your view on the performance of the STI for 2013?

Gan: 3,200 should not be a problem for the STI in the near-term provided that the index does not fall over the cliff, which is unlikely to happen. The daily, weekly and monthly charts signify more upside for STI although a correction should not be ruled out in the mid-term. Thereafter, STI is likely to reach 3,400 by mid-2013.

Tan: In the past two years, the stock market has come under continuous attacks from financial crises. However, that is about to change. Economic growth this year should outstrip that of 2012. Current reasonably low stock prices will also aid the recovery of investors’ confidence. In my opinion, the STI may test the 3,300 resistance level. Should the resistance level be broken, the index will head towards the 3,600 level. Meanwhile, the 3,030 level will act as a support.

Seow: The important resistance levels that I will be looking at in 2013 for the STI would be 3,200 and 3,280. For the support levels, I think 2,720 and 2,930 are important. I’m expecting an upside biasness if the STI can break the 3,200 level. I’m largely maintaining a buy at support and sell at resistance stance.

SI: What do you think the investment theme will be this year?

Gan: It will be to abandon defensive in search of superior returns. High beta stocks are likely to enjoy favour and cyclical stocks should do well.

Tan: The oil and gas industry looks promising for 2013. While oil prices are on a downtrend, the decline is just temporary. Being an irreplaceable commodity, oil will not exhibit huge price swings. As the global economy tries to get on its feet, demand for oil will rise. In addition, oil-related stocks are still reasonably priced.

Seow: I remain neutral on any sectors. I mean, you can be looking at the technology sector, oil and gas sector or even transportation, but I would prefer to focus on China related stocks or potential reverse takeover targets for 2013 instead. I would say I’m looking at 2013 with a very stock approach rather than a general sector approach.

SI: What are your top three picks and why do you think they stand out against their peers in the same industry?

Gan – STX OSV Holdings, OSIM International,
Neptune Orient Lines

STX OSV Holdings has my near-term preference due to the takeover offer by Italian shipbuilder Fincantieri SpA at only $1.22 apiece. This price will form a solid support and weaknesses should be able to stop here. Meanwhile, the firm managed to experience a solid growth in 2012 despite the fact that others were suffering. In addition, the selling of stakes by its parent, STX Europe, was for the purpose of raising cash. For 2013, the demand for specialised offshore vessels should continue to do well particularly if Europe and oil prices recover.

Tan – DBS Group Holdings, Sembcorp Marine, Noble Group
Noble Group makes up one of my 2013 picks. Noble, unlike Olam, is engaged in a wider range of commodity trading which involves metals and energy-related products. The prospects of such products remain bright. Furthermore, the leadership change may seek fresh impetus for growth.

Looking at Noble’s price chart, there is a strong support level whereby four rebounds have occurred since November 2011. This level is noteworthy as prices have not fallen below this level. However, the momentum of its rising share price, is seemingly retained by its moving averages which have act as a resistance. It will take some time. Should Noble’s share price break the resistance, I believe the pace of the price rally would accelerate. Resistance levels are at $1.21, $1.285 and $1.37. The support levels are $1.12 and $1.02 with the latter being the crucial support level. Based on my forecast, the stock price could reach $1.535.

Seow – China Aviation Oil, Yanlord Land Group, Ho Bee Investment
After rallying to $2.89 in 2009, Yanlord Land Group began to slide to as low as $0.69 in October 2011. In 2012 however, Yanlord is no longer on the same downtrend move.

The rebound seen in June 2012 for Yanlord’s stock price confirms this view. My target price based on Fibonacci retracement and moving average is $2.00 for this year. Also on their fundamental front, Yanlord have acquired sites in Zhuhai for developing prime residential property. The acquisition capitalises on government initiatives to inject over Rmb300 billion to develop Zhuhai into a western hub for the Pearl River Delta.

Coupling this with improved gross profit, fair value gain on investment property, net gain on disposal of available-for-sale investment, foreign exchange gain and lower finance cost, the stock may continue in its upward trajectory.

Having seen the experts’ views on the Singapore market, stay tuned to the next issue #452 for the stock picks by the Shares Investment team!

China Aviation Oil  1.200 -0.020 -1.64%   
Business: Co engages in trading jet fuel and other petroleum products. [FY18 Turnover] Middle distillates (59.9%), other oil products (40.1%).

Insight: Feb-19, FY18 net profit increased 10.5% mainly att... Read More
DBS Group Hldgs  25.150 +0.15 +0.60%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
Ho Bee Land  2.330 +0.04 +1.75%   
Business: Invests in & develops real estate properties in Singapore. [FY18 Turnover] Rental income (91.3%), sale of development properties (8.7%).

Insight: Apr-19, 1Q19 revenue rose 7.7% due to increased re... Read More
Sembcorp Marine  1.260 -- --   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: May-19, 1Q19 revenue fell 31.3% to $810.6m due to ... Read More
Yanlord Land Group  1.240 +0.040 +3.33%   
Business: A real estate developer. [FY18 Turnover] Property development (95.2%), others (2.7%), property investment & hotel operations (2.1%).

Insight: May-19, 1Q19 revenue were halved to Rmb3.6b due to... Read More

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