Singapore market still one of the most preferred

Why is HSBC overweight on Singapore despite its increasingly battered economy?

Singapore exports might be taking a beating now as global demand dissipates but its stock market is mainly resilient to trade slowdowns, according to HSBC in its latest Asia Equity Insights Quartery report.

And should growth continue to spiral downward, the government will have policy options to counter the negative market effects.

Here's more from HSBC:

We are overweight on Singapore because it is relatively unloved, has attractive valuations, a high dividend yield, lower risk of negative growth surprises and an accommodative monetary policy. Total exports in November grew by 8.2% y-o-y (vs. 1.9 % in October) but the outlook for exports is not very encouraging.

The weakness in final demand in the US and, in particular, Europe is likely to persist. Being a trade driven economy, macro numbers tend to be highly sensitive to changes in western economies that affect market sentiment.

Although Singapore has a high-beta, trade-driven economy the market is stable, developed and low beta and traderelated stocks make up an insignificant part of the stock market. Also, if growth slows further, accommodative policies in Singapore would increase liquidity in the market.

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Tags: Singapore stock market, Singapore economy