The Hang Seng Index’s recent performance is one such example, yielding total gains of 10.2% over the first 18 trading days of 2018 with 17 days of gains. This surprised consensus expectations of the index to post a 10% gain for the year at the beginning of the year, recalls the head of research.
In Lee’s view, quality stocks such as Singtel and ST Engineering are now looking more attractive to long-term investors, especially those seeking to increase their exposure to blue chips. Both Singtel and ST Engineering have been rated “buy” with a fair value estimate of $4, and are favoured by Lee as defensive plays.
Meanwhile, UOL Group and City Developments (CityDev) are rated “buy” among the property space with fair values of $9.70 and $15.30 respectively.
DBS and UOB have also been highlighted in the banking space with the respective fair value estimates of $29.50 and $30.10. The former bank, which is Lee’s top pick, has been recommended for accumulation on price weakness – while the latter is trading at 1.3 times book at its last price of $26.62, which implies an upside of 13.1%.
“With the heightened volatility, risk aversion is likely to prevail. We expect this to favour the defensive stocks and sectors such as the telecommunications and defense industries,” concludes Lee.
As at 12.24pm, shares in Singtel, ST Engineering, UOL, CityDev, DBS and UOB are trading at $3.46, $3.27, $8.78, $12.69, $25.64 and $26.56, respectively.
