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Five years ago, South Asian markets were recovering under the effect of a strong US dollar, fears of a US rate hike and lower earnings forecasts. Investors who bought in the aftermath of the turmoil were handsomely rewarded, gaining around 20% over the next four months.
After the excellent results of last year, the markets of Singapore, Malaysia, Thailand and the Philippines recorded a decrease of 9.6% compared to their January peak. The S & P 500 is up 3% over the same period. The concerns – a strong dollar, rising rates and lower earnings expectations – are similar to those of 2013.
A number of Asian-based strategists believe that South Asian stocks are Is between 5% and 10% the list of long-term investor purchases. "A lot of the bad news is already taken into account," said Chetan Seth, strategist at Nomura Securities in Singapore.
Indonesia and Thailand, for example, have done much to tighten current account deficits and have been more resilient to currency problems than markets such as Brazil or Turkey, which were among the "five fragile" in 2013 and go down significantly this year.
Southeast Asian markets are now trading at just over 13 times earnings expectations at 12 months, well below the 15-year highs of the last two decades, writes Sriyan Pietersz, strategist at Matthews Asia in Hong Kong. Whenever stocks in the region plunged to such levels, markets rebounded sharply, returning near historical price levels in the next 12 to 18 months.
The current market consolidation is an entry point for long-term investors, says Janet Tsang, investment specialist at JPMorgan Asset Management in Hong Kong. She notes that most headwinds such as trade disputes and US rate hikes are not directly related to the region itself. "Investors should look beyond noise and focus on the potential of the region," she says.
With a population of 650 million, Southeast Asia has a combined gross domestic product of $ 2.7 trillion, the equivalent of India. . "Unlike China, which is aging, the region has a large population with a very young population, and the governments of the region are proactive and willing to invest for the future with massive infrastructure spending. as they prepare for their next stage of growth, "she explains
Tsang Loves Indonesia Bank Central Asia (ticker: BBCA.indonesia), l & rsquo; One of the country's top three banks. "She has a large deposit franchise and one of the lowest financing costs, which gives her a competitive edge over her peers," she said. is down 12% from its peak in February and is trading at 19 times expected 12-month earnings, much less than the multiple of the last 25 years.
JPMorgan also favors Singapore, which benefited from renewed growth in lending and e net expansion of interest margins. They have become more inclined to return excess capital to shareholders in the form of dividends. The first choice of Tsang is the largest bank, DBS Group Holdings (D05.Singapour), which has a yield of 4%. DBS, which she calls "one of the best banks in the region," is trading at 1.5 times book value. US investors may also consider the exchange-traded fund Global X FTSE Southeast Asia which invests in the top 40 shares of the region.
Assif Shameen writes on Singapore's Asian capital markets.
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