We think 2H outlook will be worse than 1H. The economy will continue to weaken and inflation will continue to pose risks to margins.We expect YoY GDP growth of 3.6% and decelerate to 2.7% in 2009. Neel reckons there will be more consensus downgrades given this typically last for a few quarters and we have only just started.
While we have already downgraded growth expectations over the last two quarters, and are currently forecasting 4.2% and 13.7% earnings growth for 2008 and 2009 respectively. Could see some 2-4% earnings risks in property and O&M. Property risks lie in the overseas operations and cost overruns for O&M.
Neel's strategy is to remain defensive. Our sector O/W are in banks(UOB, OCBC) and telcos (Singtel, Starhub). For conglos, we likeSembMarine and ST Eng. We remain cautious about property especiallyresidential property. We prefer Capitaland and REIT for propertyexposure. We think CPO will be resilient in this environment; GoldenAgri is our top pick here.
Time to go slow. Market is not easy to pick stock now.
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