Citigroup has revised down Singapore’s economic growth forecast this year to 5.6 percent from 6.2 percent, amid market uncertainty.
However, the lender said it is confident about strong growth in emerging Asian markets for 2008.
Citigroup is also predicting that equities will be the asset class of choice.
With the volatile market, Citigroup is also advising investors to keep a close eye on telecom, banks and media stocks.
Singapore’s economic growth is expected to moderate this year because of worries over the US sub-prime crisis and anticipated slowdown in the world economy.
Citigroup thinks Singapore’s GDP will expand by about 5.6 percent in 2008. This is slower than the 6.2 percent that it had forecast in December.
Salman Haider, Head of Investments, Global Consumer Banking, Citibank, said: “If there is a longer recession, or protracted recession in the US, we do see an impact. I think retail investors should continue looking at equities as an asset class of choice.
“They should also be aware that there will be extended volatility which we have been advising clients on for a while now. And because of that, (it is) extremely important that they are diversified, in addition to being overweight in equities.”
Citigroup analysts expect the US Federal Reserve to cut its benchmark interest rate to 2.25 percent by mid-year to stabilise global financial markets.
Given the volatile market in recent weeks, Citigroup believes that valuations are starting to look attractive in certain equity sectors. It is bullish about the telecoms, media and banking counters.
Mr Haider explained, “(With regards to) banks, (it is) from the perspective that there is fairly limited CDO exposure; the calculation is strong, the dividend yield story is a strong one.
“(For) media and telecom (stocks), primarily from a cash flow perspective – (they are) strong companies, (with) very visual cash flows. (They are) positioned very well, and again the dividend yield play comes into position for the media companies as well.”
Commodities such as gold are also expected to continue to do well, as investors hedge against the dipping US dollar.
For 2008, Citigroup sees growth coming from emerging markets in Asia, such as China. However, on the flipside, slower growth is expected from the US, Japan and Europe. – CNA/ms
Source : Channel NewsAsia – 30 Jan 2008