Analysts say STI could hit record 4,000 points by end 2012

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By Rachel Kelly

Posted: 28 September 2010 2249 hrs

SINGAPORE : The benchmark Straits Times Index (STI) could hit a record high of 4,000 points by the end of 2012.

Experts said that is because companies earnings in Asia are trending upward and this will propel markets higher.

Corporates within Asia are expected to report record earnings in the next two years on the back of economic growth.

Some experts expect earnings growth in Singapore to hit 8.9 per cent in 2011, and 9.8 per cent in 2012.

For the same period across Asia ex-Japan, earnings growth is expected to go up in the region of 11 per cent.

And experts said that this will give the market a boost.

Wong Sui Jau, GM of Fundsupermart.com said: "Within the next two years, several Asian markets will see record earnings growth by 2010, Singapore by 2012, and then other countries by 2011.

"The last time we had record earnings growth was in 2007, and... that was also the time that markets hit record highs. So the question will be, if in the next two years, we see (record) earnings again, then will we see Asian markets, Singapore markets hit an all-time high? We believe yes, this is what is going to happen."

In the last three months, the STI has climbed around 8 per cent, and reasonable valuations could contribute to the index moving even higher.

And during this period of earnings growth, experts said small cap companies, as well as sectors such as leisure and technology, offer potential.

Terence Wong, co-head of Research at DMG & Partners said: "If you look at the small cap space right now, a lot of them have risen considerably. I'd be a little bit cautious, but not too much because I think most of these small caps that have gone up over the last few months, a lot of them are fundamentally sound. It is very unlike 2007.

"So coming back to 2010, many of these stocks, despite them having risen quite a fair bit, I think the valuations still justify a buy position."

In the short term however, market watchers noted that investors continue to trade with caution under concerns of a double-dip recession in the US.

But some said that such dark clouds will eventually subside. - CNA /ls