3 big themes and 7 key stock picks for 2013

UOB unveils winning strategy for investors.

In its latest Singapore corporate guide report, UOB said investment themes to consider in 2H13 include: a) rotation among high-yield stocks, b) stocks with region/ sector-specific growth drivers, and c) quality laggards. We would also urge investors to take profit in stocks that are trading at stretched valuations, such as IHH and the telecom sector.

Its key picks for 2013 in the big cap space include DBS, CCT, Suntec REIT, OUE, Keppel Corp, SIA and First Resources. Aggressive investors could consider mid caps such as Courts Asia, Ezion, Silverlake, Nam Cheong, OEL and Triyards. Key SELLs include IHH, SMRT and SingTel.

In explaining the reason for its investment strategy, it noted how the Straits Times Index (FSSTI) consolidated 1.7% mom in May as fears over a rise in US interest rates spooked markets.

"This came about after the Federal Reserves signalled that it could scale back its monetary stimulus. As expected, interest rate-sensitive sectors such as REITs (-9.7% mom) and property (-6.1% mom) were hit particularly hard. There was also no shelter in the telecommunications sector as investors took profit, which led to a 5.9% mom decline in May. Conversely, the oil services sector continued to charge ahead, rising 9.0% mom on positive newsflow," it said.

Given this background, UOB said it has a year-end target for FSSTI of 3,600, which is based on an average of its long-term mean PE and P/B.

"As ASEAN markets are trading at less than 5% off their 2-year highs and VIX are at -1SD to the long-term mean, we think higher volatility could present buying opportunities. Our 2013 strategy would be to buy large caps with dividend yield and earnings visibility on pull-back. Aggressive investors may also consider selective mid caps," it added.