REVIEW: The FSSTI gained 2.7% mom in Dec 21 and ended the year higher by 9.8% to 3,123.68. For December, most sectors were in the green led by finance (+6.6% mom), land transport (+2.2% mom) and shipyard (+1.5% mom), but gains were partially offset by the property (-2.9%) sector.

Singapore’s manufacturing Purchasing Managers’ Index (PMI) reported by SIPMM rose marginally by 0.1pt to 50.7 in Dec 21. This marks the 18th straight month where PMI is above the expansionary 50.0 mark. Likewise, the electronic PMI registered a gain of 0.2pt to post a faster rate of expansion at 51.0. The advance in December’s PMI reading was in line with the general improvement in Singapore’s economic conditions. Specifically, faster expansion rates were observed in new orders, new exports, factory output, inventory and employment.

Our view that Singapore’s manufacturing sector is one of the key economic support pillars remains unchanged. For 2022, we expect full-year manufacturing to grow by an average of 4.0%, underpinned by the buoyant global trade activity expected for the year ahead. Nonetheless, while it is too early to evaluate the potential impact of the Omicron variant, it remains to be the key downside risk to global trade demand, thus also likely impacting Singapore’s export and manufacturing outlook.

STRATEGY: Our top large-cap picks are Yangzijiang, ComfortDelGro, SingTel, Frasers Centerpoint Trust and Ascendas REIT. As for the small/mid-cap sector, our top picks are BRC Asia, Civmec and Uni-Asia Group.