Wild volatility ahead for Strait Times Index

The main stock market benchmark is expected to swing erratically between the 2,500-3,180 range.

For one, there are lingering market risks. Corporate earning results for the year might still register below expectations, according to the latest corporate guide from UOB Kay Hian.

The Euro debt mess is also far from being neatly tied up despite the headways made to refinance the debt-laden countries.

Here's more from UOB Kay Hian:

Despite the strong performance of the FTSE STI (FSSTI) in January, valuations are still undemanding trading at 2012F PE of 13.4x, which is at an 18% discount to its long-term PE mean of 16.3x (since 1993).

Given the uncertain prospects for 2012 corporate earnings and lingering concerns over the European debt crisis, we think the FSSTI could trade at a volatile range of 2,500-3,180, with the higher-end based on a 10% discount to its long-term P/B mean. We think investors should focus on selective themes, including: a) domestic consumption, b) China demand, c) M&A, and d) sustainable dividend yield. DBS, M1, CapitaLand, Frasers Centrepoint Trust (FCT), Ezion, Venture and OUE are our top BUYs in Singapore. Key sells include City Developments and NOL.

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Tags: Strait Times Index, Singapore stock market, UOB Kay Hian on Strait Times Index.