In today’s connected markets, macro events in one market can have rippling impact on the world. For example, the trade war spat between the two largest economies in the world has created uncertainty over global economic growth in 2019. The stock market was starting to find its footing until the unthinkable trade war took place. According to CIMB, here are some things investors should be looking out for in the market that would determine the market outlook in 2019.
Trade War Is Here To Stay
For investors who are looking for a cease fire to the trade war to re-lift market spirits, you might have to wait further. CIMB notes that the trade war spatter is likely to continue in 2019 and is not going to cease fire anytime soon (despite recent optimism of a deal). While it is clear that business confidence has been affected, the real impact is still not quantifiable and has yet to be fully felt. The situation would be exacerbated if the US ratchet up its pressure and impose 25 percent tariff on all imports from China.
That said, CIMB still thinks that investors should still keep a close watch on the market instead of completely swaying away. Some of the sectors have seen valuation plummet away from long-term historical mean, which presents some buying opportunity for investors.
Possibility Of Early Election In The Year Of Bi-Centennial Celebration
The previous election was held in September 2015. By law, the next election must be held before Jan 2021. With 2019 marking 200 years of history for Singapore since Sir Stamford Raffles’ arrival in Singapore in 1819, CIMB notes that an early election could be possible in 2019 given PM Lee’s hint of an early election in his recent interview.
The Bi-Centennial will also be an opportunity for a series of “feel good” events to mark one of the turning points that changed Singapore’s trajectory as a country. While CIMB admits that it might not be as eventful as SG50, it could still drive a slew of events in Singapore.
Investors Takeaway: Positioning Your Portfolio For 1H19 By CIMB
So, how should you position your portfolio for the coming year? For CIMB, there are three sectors that stand out which investors should overweight in the coming year.
CIMB recommends going overweight on the property sector as developers have been oversold at this juncture. Share price of developers have been trading at a discount (between -1 to -2 SD from the long-term mean), which is close to its crisis valuation. Among the property stocks, City Developments and CapitaLand are CIMB’s top picks.
Although the risk interest rate hikes could derail S-REITs’ valuation, CIMB thinks that the current risk-off environment will still prop up the sector as demand for safe plays will continue to dominate investors preference in the S-REIT sector. Among the S-REIT sub-sectors, CIMB recommends them in the following order: Office, hospitality, retail and industrial. CIMB’s top picks for the sector are CapitaMall Trust and CDL Hospitality Trust.
The banking sector remains as one of the recommended sectors that is common among analysts, thanks to the rising interest rate environment. In terms of stock pick for the sector, CIMB recommends OCBC as its preferred pick. While CIMB likes DBS for its fundamentals, it notes that DBS’ current share price is slightly unattractive.