Bank of Singapore, the private banking arm of Oversea-Chinese Banking Corp prefers Singapore stocks with regional exposure such as Keppel Corp Ltd and Global Logistics Properties Ltd and is avoiding domestic companies with high labour input cost.
Keppel Corp's shares have risen 17 percent so far this year, while Global Logistics' has gained 24 percent in a broader market that is up 12 percent.
"Concerns with inflation could continue to cap easing by the central bank even as external demand moderates," Sean Quek, head of equity research at Bank of Singapore, said in a note, referring to the Singapore central bank.
Singapore's inflation slowed to 5.0 percent in May from a year ago, but inflation has remained high compared with other Asian countries due to a shortage of homes and a surge in car prices.
"Efforts to raise wages for lower-income groups and further reduce foreign-worker dependency, given low unemployment rate, do not bode well for Singapore's cost structure and competitiveness," Bank of Singapore said.
Overall, the private bank has a neutral recommendation on equities but is positive on Asia ex-Japan.
"Singapore continues to be a good space for relatively stable high dividend names offering attractive total returns in a low interest rate environment," it said.
1650 (0850 GMT)
(Reporting by Anshuman Daga in Singapore)