What every investor should know when doomsday looms

If tomorrow never comes, there is value now, says CIMB.

According to CIMB, "we have been Overweight on Singapore since Feb and remain so after our Asian marketing rounds despite the fragile macro outlook. The investors we met were somewhat surprised at how Singapore has quietly outperformed, despite it being an open economy."

Here's more from CIMB:

We think that this reflects 1) its low -1SD valuations, 2) resilience of individual companies, and 3) high levels of risk-averse money seeking havens. Though we sense some unease after the recent outperformance, we maintain our Overweight and 3,400 index target (14x CY13 P/E), with high yields and a firmer currency being the catalysts.

What Happened
We narrated a stock-specific strategy with top picks listed on the next page. In addition to highlighting how banks’ non-NII could surprise as they gain traction with global corporate clients and Singapore develops as Asia’s funding hub, we linked this with how it will drive office demand.

We are bullish on office, the only segment among the REITs that still shows value. We like SCI for SMM’s upcoming orders but agreed that KEP might be the better structural play in the longer term.

What We Sensed
Investors conceded that the banks were not expensive yet but asked where positive surprises might come from. The pushback was on a regional perspective as Singapore banks have outperformed regional banks by a fair bit. On property, there was growing acceptance of Capitaland on a more consensus view that China was past its worst.

GLP was more difficult to sell as valuations reflect current book value accretion. Office views were mixed as some still have doubts on the demand side. Capital Goods got the most pushback with forward margins being a common concern and comparison with Korea yards’ cheap valuations being the other sticking point. Otherwise, the most common topics were F&N, APB and how hard it is to find cheap consumer names.

What You Should Do
Most of our top picks have done well YTD. We retain them for now and will review them post results. With companies preparing for a downturn, we maintain that it is not right to invest with a stance that doomsday is a certainty. If tomorrow never comes, there is value now.

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