Oil & Gas to shine in 2008. In our 2007 Strategy report, we highlighted that
the environment remained favourable for equities and this was clearly evidenced
in 2007, undeterred by high oil prices.The oil and gas sector was our top
sector pick in 2007 and most oil and gas stocks have posted good gains. For
2008, we continue to reiterate our overweight rating for this sector as we believe
that oil and gas equipment and service sector still has further room for growth
ahead.
Banking sector is another of our pick for outperformance in 2008. Banks
have done well in 2007 with record earnings, buoyed by strong loans growth
and good fee income. While the global credit woes have taken the shine off the
sector in 2H07, we believe that once the sub-prime issue blows over, prospects
will start to look better in 2H08, buoyed by fee-based activities and the
possibilities of more M&A activities.
Near-term volatility to remain. For the near term, volatility will remain due to
the anticipated slowdown in the US economy, with Nov US consumer confidence
index showing another decline. There is also growing concern of further
writedowns for the financial system.
Our picks for 2008. While the outlook appears to indicate a slowdown, we
expect interest to pick up in 2H08. We still like the oil & gas, banking, selected
industrial and China consumer plays. Our 2008 stock picks are Cacola, China
Sports, DBS, Ezra, KepCorp, Man Wah, Midas, Pacific Andes, Rotary
Engineering, ST Engineering, Tat Hong and UOB.
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