Strategists favouring Singapore, dividend stocks in hawkish Asia

Bloomberg

Surprise policy tightening moves announced by central banks in Singapore and the Philippines signal Asia is now fully awake to the threat of accelerating inflation, and is playing catch up with its global peers.
Analysts in the region recommend a number of strategies that investors can take in response to the increasingly hawkish environment, including favouring the Singapore dollar, dividend stocks and Thai baht. Conversely they are generally bearish towards assets in Indonesia and the Philippines.
Singapore’s central bank allowed local currency to appreciate by re-centering midpoint of policy band up to its prevailing level, while Philippine policy makers followed afterward with its own surprise three-quarter-point move. The announcements came after US inflation data once more exceeded forecasts.
Keeping in view that inflation continues to be high and the Fed is hiking rates, it would be prudent to stick to value stocks with dividend yield, said Sumeet Rohra, the fund manager of Smartsun Capital Pte in Singapore.
“Stock markets may be closer to finding a floor between 7% to 10% from current levels as oil and other key commodity prices fall, the possibility of some type of truce between Russia and the Ukraine and the EU intervening to ensure gas supply from Russia, Rohra said.
Asian central banks will likely start, or continue with their respective hikes with Bank of Thailand lifting rates in August and Bank Indonesia beginning its cycle in September or October, depending on consumer cost pressures, said MUFG Bank Ltd strategist Jeff Ng.
“Singapore dollar is most likely to benefit in the current environment, while the Thai baht, Malaysian ringgit and Indonesia rupiah may find some resilience from the greenback strength from rate hike expectations, he added.
Mayank Mishra of Standard Chartered said the Philippine peso is unlikely to reverse its current weakening trajectory even if the surprise hike gave some short-term support as it’ll be buffeted by a widening current account deficit.
“In Asian FX more broadly, slowing external demand and weak risk sentiment may remain a headwind. Singapore dollar is likely to outperform, and the bank remains underweight Philippine peso and Indian rupee,” Mishra added.
“It’s difficult to fight the tide and think you can get away with liquidity controls for example in Indonesia, when your neighbour is going 75 basis points,” said Jeffrey Halley, senior market analyst in Singapore.
Singapore dollar will be a haven and benefit from flows as MAS hikes, while Indonesia looks like a good place to go underweight,” said Jeffrey Halley, senior market analyst in Singapore
It’s difficult to fight the tide and think you can get away with liquidity controls for example in Indonesia, when your neighbour is going 75 basis points. Prepare for outflows,” said Jeffrey Halley, senior market analyst in Singapore.
Central banks are racing to the top on rate tightening led by the advanced economies in a bid to tame inflation. Investors should position for a compressed cycle, and we are mildly bullish on US Treasuries.