- We have added names with attractive valuations and dividend yields, cash-rich balance sheets and good earnings visibility to our model portfolio. They are Valuetronics and China Aviation Oil.
2023 Review
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- For the second consecutive year, the standout gainers were conglomerates Sembcorp and Keppel. Utilities are enjoying higher valuations as they raise exposure to renewable energy. The re-rating is perhaps due to the high growth potential and future-proofing of returns.
2024 Outlook
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- Our concern is weaker US economic growth in 2024. We believe the US consumer will be stretched by lower pandemic savings, slower job additions, rising debt, cutbacks in fiscal handouts and the return of student loan repayments.
- We had primed ourselves for a modest recession in the US last year. This did not occur due to huge incremental spending by the US government, equivalent to a US$1.3tr deficit, or 3% of GDP. Furthermore, China’s growth is sluggish, weighed down by falling investments and a moribund property sector. China is unlikelyto contribute to global growth unless there is a major fiscal impulse by its government.
- Still, we are optimistic on equities and bonds as we enter a monetary easing cycle. The Fed is not only prepared to cut rates three times in 2024 but also cut them pre-emptively. Given its recognition of a time lag in the transmission of higher interest rates to economic activity, it is willing to cut even before it senses a meaningful economic slowdown or inflation hits its 2% target.
- With a Fed ready to act, any economic slowdown will be backstopped by easier financial conditions. The market is expecting six cuts, double the Fed’s three. Disinflation underway in the US will provide cover for the Fed to cut.
- Singapore is likely to go back to trend growth of 1-2%. A modest recovery in exports, foreign direct investments, tourism and population growth will drive this growth.
About the Phillip Absolute 10 portfolio
- Read more at SGinvestors.io.
Above is the excerpt from report by Phillip Securities Research.
Clients of Phillip Capital may be the first to access the full report in PDF @ https://www.stocksbnb.com/.
Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2024-01-02
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