The 3Rs that will push SG equities above pre-COVID levels in 2022

These will also narrow SG’s performance gap with other markets in Asia.

Analysts are expecting Singapore equities to surpass pre-COVID levels come 2022 and narrow their performance gap with other markets in Asia.

In its Equity Strategy Outlook, Morgan Stanley said what will drive SG’s equities to this path are 3Rs: reopening, reflation, and reorganisation.

‘Reopening’

Morgan Stanley said that continuous reopening of business and travel will help sustain Singapore’s above-trend economic growth in 2022 as it will “boost market confidence and drive corporate earnings growth through the year.” 

‘Reflation’

Singapore’s economy will likewise be driven by “steadily rising interest rates and higher-but-benign inflation” in 2022, according to analysts.

“Relatively early cycle dynamics and a lower starting point suggest more growth runway for equities before over-heating concerns eventually kick in,” Morgan Stanley said.

‘Reorganisastion'

Morgan Stanley said “rebalancing” of the MCSI Singapore index “towards more tech representation better aligns Singapore with the rest of the world.”

In particular, the analysts said the addition of Sea Ltd., a global consumer internet company, “results in an optically higher P/E multiple for the index.

Sea Ltd's weight in the index is expected to grow around 30% by February 2022,  making it the largest single constituent in the index, according to Morgan Stanley.

Factoring in the higher weighting of Sea Ltd., Morgan Stanley raised the index target for MCSI Singapore to 1,950 which represents a 14% upside potential.