Why Singapore firms' earnings reports won't be too impressive

It will be a soft season.

According to CIMB, it does not expect the results season that is coming in to be above expectations. Initial results show a relatively soft season.

Here's more:

Our end-13 FSSTI target is 3,400pts, based on a bottom-up methodology. The next two weeks is all about the results season. Initials signs are that other than the property sector, numbers look a bit soft.

The capital goods sector has started the reporting season and revenue recognition has been somewhat below par.

While we await with bated breath execution in Brazil, we do not think margins are likely to surprise positively in 2Q. Aviation and aviation services
reported recently and came in below expectations, if one excludes non-core divestments.

The banks will report in early August and we expect treasury income to be soft as banks take losses on their investment securities portfolio.

For property, the Capitaland group of companies has seen NAV appreciation come up above expectations. Other trends include a faster-than-expected pick-up in China residential sales, flat office leasing momentum, poor hotel performance and flattening rental reversions for retail malls.

Our Overweight sectors remain property, capital goods and consumer. Across sectors, property and REITs, being the interest rate-sensitive sectors that have been sold off the most in June, have been among the stocks that have the stronger performances in July.

Financials have also done well on expectations of bottoming margins and SGX’s strong results. In a rising rate environment, banks should do well further out but we think there will be better buying opportunities post the results.

We are not positive on the global export and commodities sectors; they remain our Underweights and they have been the laggards.

We prefer ASEAN consumer and infrastructure stocks. Our top stock picks are DBS Group (broad-based earnings growth, potential rising NIM environment), Thai Beverage (exposure to the ASEAN consumer segment) and UOL (trading at deep discount to RNAV).