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The impact of rising inflation amid climbing commodity and energy prices will remain a core focus among equity investors in the months ahead. Against this backdrop, we expect near-term upside for the Straits Times Index to be capped.
We believe banks and upstream commodity producers will do well in the current inflationary environment. Beyond inflation, pay attention to reopening beneficiaries.
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Outperformers in an inflationary environment
Singapore’s February CPI rose to 4.3% y/y. Our economist sees headline inflation rising 3.8% y/y this year, vs. 2.3% in 2021. Against the current inflationary environment, we believe banks and upstream commodity producers will do well.
Our preferred picks are UOB and Bumitama Agri.
Border reopening beneficiaries
Singapore has drastically relaxed border restrictions, allowing all vaccinated travellers to enter and removing on-arrival testing. This will lead to a recovery in tourist arrivals, which will benefit the aviation, hospitality and tourism sectors.
We favour SATS, Far East Hospitality Trust, and Genting Singapore.
Domestic reopening beneficiaries
Singapore has also loosened social distancing measures – allowing more employees to return to work in office, groups of 10 to gather, and nightlife activities to resume. We expect this to give transport companies, retail and office S-REITs a boost.
We like ComfortDelGro, Frasers Centrepoint Trust, and CapitaLand Integrated Commercial Trust.
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