Consumer staples and healthcare may be able to weather market volatilty.
Whilst Asia’s corporate profitability will continue to be affected by ongoing market volatility, destinations such as Singapore and Indonesia are expected to be better off than their peers as they rank amongst the top investment hubs in the region, UOB Asset Management revealed.
The earnings outlook for Singapore is steady, supported by the government’s fiscal ability to encourage growth, a more stable property market and improved profitability of banks.
Meanwhile, Indonesian equities are also expected to benefit from increased government subsidies and spending to boost domestic consumption. Bank Indonesia’s proactive tightening of its monetary policy and implementation of new hedging tools will also help to reduce the volatility of the rupiah.
Overall, UOBAM noted that defensive sectors such as consumer staples and healthcare may be able to weather market concerns better than blue chips and stocks with high dividend yields. Alternative investments such as hedge funds and private equity are also considered tools to seek capital protection and returns.
In Singapore, consumer staples was the second-best performing sector in Q1 with 13.9% total return, reversing the -2.9% decline in 2018. It was also amongst the top net buy sectors for the quarter, garnering total institutional inflows of $61.5m, data from SGX show. The healthcare sector also proved resilient as Singapore's top healthcare stocks averaged a dividend indicated yield of 5.3% as of 25 April to outpace the of the benchmark STI 12M yield of about 4%, according to SGX.
“These investment strategies help to reduce risk and to enhance long-term risk-adjusted returns irrespective of general market conditions,” UOBAM explained, recommending a ‘first-principles’-based investment approach to navigate global trade tensions.
Economists and the International Monetary Fund forecast global real GDP growth for 2019 to be at above-trend levels of 3.6-3.7%. UOBAM expects equity returns of 10-15% for 2019, and bond yield returns of 4-6% expected for the full year.
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