No promises: Inauspicious prospects loom over struggling local stocks in 2015

Is there a silver lining?

The year of the goat won’t go down as one of the best in history, at least where local stocks are concerned. According to Macquarie Research, a muted domestic economic outlook and an uneven external picture won’t set pulses racing next year.

The report also noted that while snap elections in the year of Singapore’s 50th anniversary are becoming a consensus view, such an event won’t provide any major catalysts.

“Labour reforms are unlikely to get rolled back and macroprudential measures, like the TDSR, are likely to stay in place for the foreseeable future. Land Transport reform should continue, but we don’t foresee similarly seismic initiatives in 2015.

And while we probably will see more stimulus measures in the FY15 budget in February, they are likely to echo those from FY14’s budget, providing only marginal benefits to most listed companies outside of the healthcare and SME spaces, in our view. We could see incremental initiatives directed to the citizenry, but don’t see FSSTI’s consumer space as a great play on that theme,” noted Macquarie Research.

However, the report also states that 2015 will be the second consecutive year of ‘quiet compounding’ for the FSSTI.

“Aggregate Index earnings expectations are starting to hold firm and Singapore has the least aggressive growth expectations within Asia ex Japan as we enter 2015. The market multiple is also by no means stretched. The 9% total return we forecast for our relatively defensive market is buttressed by a 3.5% yield, which is regionally joint-highest with China’s.

We think this feature should prove attractive against the noisy backdrop of sloshing liquidity and slower than expected interest rate increases our team is calling for. By contrast, we don’t expect the MAS to shift to a looser monetary policy in 2015, which should arrest the recent decline in the S$ and protect the value of Singapore’s dividend,” stated the report.