SINGAPORE (Dec 22): Driven by the rally in blue chips, the Straits Times Index is up 18.5% in the year to Dec 18.

Will 2018 bring sunnier skies for locally listed players?

The Singapore equity market could deliver about 10% in returns next year with an “earnings recovery story”, says Suresh Tantia, assistant vice-president and investment strategist for Asia-Pacific at Credit Suisse.

“In Southeast Asia, Singapore is the only market that offers cyclical exposure to a synchronised global recovery, because we are such an open economy and mostly dependent on exports. After two years of struggle, finally this year the Singapore economy is growing very rapidly.”

In 3Q17, the Singapore economy grew 5.2% y-o-y — the fastest pace in nearly four years. The Ministry of Trade and Industry is forecasting growth of 3% to 3.5% for 2017.

Selena Ling, head of treasury research and strategy at OCBC Bank, says 2017 kicked off with a recovery in manufacturing and electronics. Looking ahead, she believes the growth should extend to the services sector.

This year, the US Federal Reserve hiked the benchmark federal funds rate three times. Another three hikes are expected next year. Given the expectation for higher interest rates, analysts are optimistic about local banking stocks.

Collective sales hit a peak of 21 deals worth $6.8 billion as at Nov 30. Private residential property prices inched up 0.7% in 3Q17, after 15 straight quarters of decline. Now, analysts are predicting an uptick in rentals next year.

The Oil & Gas sector has been beaten down since mid-2014, as oil prices tumbled following a boom in US shale production. But a rebound in oil prices is now projected. OCBC’s Ling is forecasting that both WTI and Brent crude prices will recover to US$65 a barrel by the end of next year. And analysts believe the worst may be over for Singapore's two leading rigbuilders.

While focusing on the big names, analysts are also watching out for small-caps with hidden potential for upside next year. One is APAC Realty, which operates a real estate brokerage.

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This story, written by Sharanya Pillai for The Edge Singapore Issue 811 (Dec 25, 2017). first appeared online on Dec 22. To find out which stocks analysts are recommending, get the print edition of The Edge Singapore Issue 811.