By Azhar Khalid

IF THE war were hypothetically to end tomorrow and this fuels a snap rally in the stock market, which stocks are likely to gain the most?

Well, analysts polled by The Straits Times are putting their money on mainly three types of companies.

The first group comprise those that have significant business links with the US and are sensitive to the prospects of a cyclical recovery in the US.

They include contract manufacturers such as Venture Corp and computer notebook casing manufacturer Huan Hsin, which supply goods and services to big US names such as Hewlett-Packard.

Another example is Singapore Technologies Engineering (ST Engg), reckons Morley Fund Management director Sheree Tan.

Some dealers and analysts believe that the Iraq war may open up opportunities for the firm to gain new contracts from the US Army.

Venture and Huan Hsin are also in a more general category of what is known as 'high-beta' stocks.

The beta indicator measures the volatility of a stock or a portfolio in relation to the market index.

Since high-beta stocks tend to rise or fall faster than the market, they are a second group of companies whose share prices could get an extra boost in the event of a general market rally, say analysts.

Other stocks in this category include Chartered Semiconductor Manufacturing, ST Assembly and Test Services and computer monitor manufacturer TPV Technology.

Finally, analysts also say that companies with good fundamentals are also poised to gain from a post-war rally.

They include counters such as Keppel Corp, SembCorp Industries (SCI) and Fraser & Neave (F&N), which either have secure order books or defensive earnings profiles with robust cash-flow positions.

Keppel, for example, has an order book of about $1.6 billion, while SCI's order book stands at about $4 billion. F&N is favoured because it has a diversified earnings base with steady growth expected in all its divisions.

Still, most analysts tempered their predictions yesterday with a standard caveat.

Once the risks from the war factor have diminished, they cautioned, the markets will focus on gloomier economic factors such as the outbreak of severe acute respiratory syndrome (Sars) and recent revisions to Singapore's economic growth rates, which are weighing heavily on investor sentiment.

'There will certainly be a short-term rally and the markets may rise by about 10 per cent over the next few days,' said Mr Charles Wheeler, director of Standard & Poor's Equity Research.

'But I don't think it will be a long-term rally as the valuations are not there yet and economic problems that pre-date the war are likely to post-date the war,' he added.

Ms Tan noted: 'The US economy looks pretty weak as economic data that has came out in recent weeks are still on the weak side.'

Consumer spending in the US, for example, has slowed to a crawl and capital spending is lower than it was a year ago.

This is why analysts say that cyclical stocks like banking and property counters are unlikely to be buoyed by post-war euphoria.

UOB Kay Hian associate research director Peggy Mak said that 'there is still some under-estimation of the Sars impact and the unknown valuation may create further uncertainty in the market'.

'I think we can only get some clear indication of the Sars impact on the market within the next three months,' she added.

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