The Singapore market is currently trading at 2010E P/B of 1.65x. Over the next 12 months, we expect Singapore to head to its five- year average P/B as the market starts to discount a return to positive economic growth. This implies an MSCI Singapore Index target of 356 (based on the five-year average P/B of 1.8x) or 14% upside potential. The corresponding 12-month STI target is 2,991, or 16% upside from here.

Here we compare CS coverage stocks (with market cap >S$1 bn) against their five-year average P/B. Stocks still trading at more than one standard deviation below their individual five-year average P/B are SUNT, CMT, AREIT, Venture, CD, GE, RLS, KepCorp, SPH, Olam and STE. Within this group, we have OUTPERFORM ratings on AREIT, Venture, CD, GE, RLS, SPH and Olam.

We remain OVERWEIGHT banks, property, finance, media and transport and UNDERWEIGHT telecom and capital goods. Our top picks remain SIA, SGX and UOB. Our least preferred names are COSCO, ST Engineering and SMRT.