Citi forecasts Singapore’s recession to be over by year-end, has 2,400 as 12-month STI target

Monday, 20 April 2009 17:14
CALL IT WHATEVER you want — green shoots, a new spring or even light at the end of the tunnel.
Clearly, even though the real economy remains mired in a deep recession and we still have two or more quarters of fairly rough period ahead, the long-term sentiment is starting to change.
Even Citigroup, the investment bank that first turned fairly bearish on Singapore’s economy a year ago long before its other peers, now says Singapore’s recession will end by the fourth quarter of this year. It is advising its clients to get ready to buy.
Indeed, it has a 12-month 2,400 target for the benchmark STI. That’s over 23% gain from current levels. And the market has already gained nearly 30% from its early March lows.In a new report issued over the weekend, Citigroup strategist Chua Hak Bin and his team forecast that Singapore’s economy will shrink 8.2% in current April-June second quarter and 6.2% in the July-Sept third quarter “with a good chance of positive growth” of up to 0.3% in last quarter.
“Aggressive global fiscal and monetary easing, coupled with Singapore government’s fiscal measures, and the opening of two integrated resorts by early 2010 will support the recovery,” Citi’s strategist Chua and his team wrote in the note.
They explain that among the reason they are turning positive on the Singapore market include stabilising economic indicators, consensus 12-month forward STI earnings growth numbers having fallen 23% and more attractive valuations. Moreover, they say the downside risks for the Singapore dollar look limited following its recent devaluation by the Monetary Authority of Singapore and its maintenance of a neutral bias.
Chua and his team of strategists are advising clients to “buy” on upcoming pullbacks. They concede the market may pull back with STI dropping to 1,700 but say the likelihood of re-testing 1,460 reached in early March is now fairly low.
Citi is recommending clients to “buy” stocks like DBS, SGX, UOB, Keppel Corp., Wilmar and ST Engineering and “sell” Singapore Airlines and Capitaland.