DBS Equity Picks

Betting on inflationary beneficiaries
Add Angang Steel
Drop Ping An Insurance

Although the Fed continues its dovish tone, further inflationary data
points may cause the market to start second guessing this stance.
Economic optimism, expectations of higher inflation, and stimulus
spending have brought forward expectations for the Fed to hike rates in
Dec 2022 , rather than 2023 . The record high US equity market may be
vulnerable amidst this relative complacency. Should any sell off occur, the
underperforming HK market will not be spared. Whilst we continue to be
bullish on the HK market in the long term, near term risk regarding
inflation should not be ignored

The energy sector historically offers the best returns during inflationary
times. Old economy stocks also benefit from the cyclical recovery and
interest rate upcycle. We continue to prefer cyclical recovery stocks in the
financials, property, materials, and energy sectors, as these are both
beneficiaries of earnings recovery in 2021 , and being relatively shielded
from inflationary pressures. We also advocate domestic recovery,
particularly in post COVID domestic spending in China for discretionary
retail, airlines, and gaming.

We remove Ping An Insurance after its earnings miss in 1 Q 2021 , while we
add Angang Steel, one of our inflationary beneficiaries into our top pick mix.
DBS Group Research .