SINGAPORE: Singapore's stock market closed the year 10.1 percent higher than where it ended in 2009.
Although the last day was lacklustre, with the index falling 0.7 percent on last-minute profit-taking on a shortened trading day, analysts are saying 2011 could bring investors similar gains.
On average, each of the 30 component stocks in the Straits Times Index gave investors returns of just over 23 percent this year, including dividends.
The oil and gas sector outperformed, with total returns of 46.7 percent, while industrials gave investors 44.2 percent.
The laggards were consumer goods which returned just 5.7 percent. This sector was dragged down by food producers such as Wilmar, which lost 11.3 percent.
Overall, analysts predict industrials such as Fraser & Neave and Jardine Strategic to continue to stand out next year.
They also say oil rig plays like Sembcorp and Keppel Corp will continue to see strong demand as energy explorers replace their aging fleet globally.
Anthony Hoe, head and senior fund manager at Phillip Securities, said: "If you look at the market as a whole, there are many big-cap stocks out there which are still trading nowhere near the pre-2008 highs; the companies are still doing well, growth is not exactly much slower than pre-2008 levels. In fact many companies out there continue to grow very well, paying good dividends, so there is no reason for me not to be optimistic that STI can go higher."
Valuations are undemanding. The price-to-earnings ratios of STI is 14, versus the historical average of 15.
Relative to stocks in Asia ex-Japan, the Singapore market is trading at a 10 percent premium versus 20 percent historically.
A pullback in prices will make it even more compelling for investors to buy Singapore equities.
Kelvin Tay, chief Investment strategist (Singapore) at UBS Wealth Management Research, said: "I think any sort of mid-cycle correction would probably see the market going down between 5-8 percent and that would be a good opportunity in our opinion for investors to start picking up some of the stocks, in light of the fact that we think that the STI next year is likely to post gains of 10-15%."
Thanks to a strengthening Sing dollar, the rise in the Singapore index this year was almost 21 percent in US dollar terms, beating the 17 percent gain in the MSCI Asia Ex-Japan index.
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