Equity Securities

Question 1

You work as an equity analyst for a Singapore stockbroking firm. Your firm’s economist team recently published a global economic outlook for the coming year. Key points in their Report are:

The inflation challenge varies across economies. For example, consumer price inflation has remained low in China even though producer price inflation has been rising. Central banks in Europe and Japan still see the recent pick-up in inflation as transitory, while inflation seems to be more of a challenge in the US. Overall, headline inflation worldwide is likely to come off the highs of 2022, but the undercurrent of firmer inflation could continue.
However, given the strong recovery momentum and some supply-side and labor market distortions, core inflation could remain above the Federal Reserve’s (Fed) target of 2% for much of 2023. Rising inflation could pressure the Fed to continue raising interest rates until the end of 2023.
Due to inflationary pressures, Singapore’s economic growth has been revised to 2 to 3% for 2023. The economy has recovered strongly from the covid-19 pandemic, with GDP growth of 7.6% in 2021. Projected growth for Singapore is 3-5% range for 2022.

Using the information provided, appraise the outlook for interest rates in Singapore for the coming year.

Question 2

(a) Examine either the Banking or REIT sector of the Singapore Stock Exchange (SGX). Examine the likely impact of a rising interest rate environment with moderating economic growth on your chosen sector.

(b) From your chosen sector, select a company expected to outperform or underperform. Appraise your choice by considering this company’s revenue and profit outlook.

Question 3

(a) Value the shares of your chosen company using the Dividend Discount Model.

(b) Compare your chosen company’s relative valuation methods with at least two (2) other companies listed on the SGX.

Question 4

From the information gathered, design a short recommendation summary page on the stock in Question 2, using the reference:

The share price may rise by more than 10% over the next 12 months
The share price is expected to remain stable at current levels
The share price may fall by more than 10% over the next 12 months

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