Signs of an improving global economy
THE global economy is regaining its strength with improving economic numbers being seen in most parts of the world. DBS economists believe that the US labour market is now at the stage of supply shortage, as job openings are being created at a more rapid pace relative to hiring. The current situation is now very close to the peak of the economic boom during the dotcom and subprime bubble periods.
Encouraging signs from the euro zone include accelerating credit growth to both households and corporates.
In Asia, one of the best gauges of the global economic situation is Singapore’s open economy. We have seen positive signs from Singapore’s manufacturing and services sectors. Its economy is expected to grow 2.8 per cent this year compared to 2.0 per cent growth during 2015-2016.
Meanwhile, geopolitical risks are rising, particularly in the Korean peninsula and Syria.
Thai bourse vulnerable
There are signs of flight to safety, with money flowing into the yen, gold, and bonds.
We believe the Thai stock market is vulnerable to negative news.
The market is currently trading at a 2017 price to earnings of around 17 times, well above the 15-year historical average of 15.1 times.
We believe the upside is quite limited from the current level. Our picks in April are Bangchak Petroleum (BCP), Bangkok Expressway |and Metro (BEM), Thanachart Capital (TCAP), and Thai Union Group (TU).
For the overseas market, we recommend the US-listed “iShares Edge Minimum Volatility ETF” for its use of defensive investment style with low beta.
The ETF is expected to outperform the market if the sentiment turns |bad.
For yield play, we recommend the Singapore-listed “Manulife US REIT (MUST SP)” which invests in freehold office buildings in the US and comes with a net yield of 7.5 per cent in US dollar terms.
