Think Singapore (CITIBANK)

Alert: Singapore Nearly Back at an Attractive Entry Level



risen sharply (Fig 1), reaching just above the 5-year average of 2.1%. Better GDP

growth (we recently raised 2013’s GDP forecast to 2.3%, more details in Citi’s

economist Wei Zheng Kit’s note

possibility of the US tapering its QE program plus a stronger US$ are likely

contributors. While rising 10Y yields have initially caused weakness among REITs

and yield stocks in Singapore, recent concerns about the current-account deficit in

Indonesia have increased worries. The STI Index has lost nearly 10% in a month

and is now flat YTD. Singapore’s economy is linked to Indonesia’s via exports,

banking (trade finance, wealth management), property ownership, tourism as well

as the medical tourism segment.Singapore's 10Y government bond yields rise to 5-year average — Yields haveSingapore Macro Flash), discussions on the



back to its mean of 15x PER vs. +0.5 SD only a month back, just about 4% away

from 14.2x PER -0.5SD (3000 STI Index). Assuming no regional contagion that

leads to a sharp decline in asset values, we would be looking at this as a relatively

attractive entry level for investors given the anticipated cyclical recovery for

Singapore in 2H13. Post the GFC, Singapore’s key support level during the Euro

crisis in Oct 2011 has been 13x PER -1SD (~2700 STI Index). Expectations in

Singapore are benign - within our coverage universe, flat aggregate EPS trends are

expected for 2013, growing into a modest 8% in aggregate EPS growth for 2014E.

Our Earnings Revisions Count ratio (ERC, the upgrade vs downgrade count) is in

mildly negative zone at -10% (vs -16% at end-Feb post 2012 results – see Fig 4).Singapore nearly back at an attractive entry level — STI Index valuation is now



been strong YTD, a decline of 30% YoY (see Fig 3) is similar to the weakest point

during the Euro crisis. At its weakest point, Singapore’s electronics exports declined

to -40% YoY during the tech bust more than a decade ago as well as during the

GFC. This suggests cyclical drivers are likely in 2H13E. A bottom in electronics

exports has historically led Singapore’s GDP and stock-market recovery cycles.Electronics exports bottoming — While Singapore’s electronics exports have not



Our view remains that the rig cycle remains intact despite volatility in oil prices and

believe orderbook momentum can continue in 2H13, with margin resilience. 2) 3 key stock picks when we return to stock-picking mode — 1) Keppel Corp:UOB

has retraced by ~10% and has come back to levels where there is positive ETR. 3)

HK Land

risk of rising interest rates impacting cap rate valuations, we are already using a cap

rate of 5.0% vs the firm’s 4.25%. Within a stronger US$ environment, we would also

be looking at industrial firms such as ST Engineering and Venture Corp.is at discount levels of nearly 40% vs an average of 20%. While there is