Upgrading Singapore (laggard) and Indonesia (cheap cyclicals)
We are upgrading Singapore to OVERWEIGHT from Underweight. In our report on 24 April, Time to look at the laggards?, we suggested that Singapore was the most attractive among the laggard markets. While Singapore’s absolute price-to-book has risen from 1.19x then to 1.35x now and the discount has narrowed from 21% to 18%, we believe that the stronger-than-expected bank results could act as a catalyst for further gains.
We are upgrading Indonesia to OVERWEIGHT from Neutral – cheap cyclicals. In our reports on 23 April and 4 May, Any Cheap Cyclicals Left?, we suggested that Indonesian coal was trading at a 176% discount to the region. We are funding these upgrades by trimming our Overweight calls on China (up 96% from the October lows, the best performer) and Korea.
Top picks – UOB, SGX, SIA, Astra International, Bumi Resources, United Tractors. We are adding UOB, SGX and SIA to the Credit Suisse regional portfolio and dropping Wilmar on valuation grounds. In Indonesia, we are keeping Astra International but adding Bumi Resources and United Tractors.
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