Analysts warn of deeper stock rout as market turmoil intensifies

The STI could fall by another 6-8%.

There’s more in pain in store for the Straits Times Index after its almost 17% fall in the past quarter.

RHB Research analysts believe that the index may still continue to decline by 6-8% in the weeks ahead, on back of continued fears of a China slowdown along with the possibility of a rate hike by the US Fed.

RHB Research cautioned that the index might fall back to the 2,700 mark, which was the depth of the Euro debt crisis.

“We revise our FY15 STI target to 2,950 pts in view of the present macro uncertainties that could stretch over the next 3-6 months. In this climate, high earnings visibility and attractive valuations remain our key considerations. We recommend selecting counters this period, in bracing for the bumpy ride ahead,” said RHB.

 “We prefer under-valued large-cap companies with strong balance sheets to withstand the ensuing interest rate hikes and market turmoil. We also like companies that generate stable and growing recurrent earnings, supported by net cash positions,” the report noted.