Compiled by Cai Haoxiang
DBS Group Research, Jan 4
We expect Asia equities to deliver gains yet again this year.
A global recovery scenario should continue to drive earnings which had been the key driver in re-rating valuations in Asian markets last year.
Based on our year-end index forecasts, all Asian markets will have a target return of five to 15 per cent for 2018 in local currency terms, ex-dividend.
Our "overweight" or "underweight" recommendation for a market is thus a relative call, with fundamentals in most markets running soundly, all stock markets well-correlated to the US market, and subjected to the same set of global risks.
Other than looking at target returns, our asset allocation is based on the assessment of the potential upside and downside surprises among these markets.
This has landed us with an "overweight" on China/Hong Kong and emerging Asean countries including Thailand, Indonesia and the Philippines.
The extension of the global recovery, which is more synchronised and broader now, makes us comfortable with "neutral" weightings on Singapore and South Korea despite their strong performance in 2017.
Our key "underweight" is on Taiwan and Malaysia where domestic sentiments are still weak.
We believe the Straits Times Index could attempt to hit 3,688 by end-2018, representing around 10 per cent total return inclusive of dividends.
Catalysts for an upside surprise to this could come from a peaking in banks' non-performing loans, especially for the oil & gas sector, better-than-expected prospects for China's growth, positive domestic sentiment as the economic recovery becomes more established, and a more sanguine outlook on geopolitical events.
The Singapore strategy team favours the banks, property, consumer goods as well as the offshore and marine sectors to ride the broad-based recovery as well as rising oil prices.
TIANJIN ZHONGXIN PHARM
TARGET PRICE: US$1.52
JAN 4 CLOSE: US$0.96
UOB Kay Hian Research, Jan 3
In its first-ever investor plant trip, TJZX's new chairman acknowledged the firm's prior slack and promises to awaken the sleeping giant.
Their target is to "double in three years" and we believe it is possible to double drug manufacturing profits by 2020.
The necessary reforms have been laid out and management interest will be profit-aligned due to a proposed profit-linked remuneration plan. Given the traditional Chinese medicine industry's bright outlook, we reiterate "buy" with target price raised to US$1.52 (S$2.02).
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