Investors should switch from Taiwanese to Southeast Asian stocks as the region’s discount to North Asia is among the biggest on record, Credit Suisse Group AG said yesterday.
Ratings for Thailand and the Philippines were raised to “overweight” from “underweight,” analysts Sakthi Siva and Kin Nang Chik wrote in a report.
Thai financial and energy companies and Philippine telephone companies were among the most undervalued, they said.
Southeast Asia is at a 142 percent discount to Taiwan, Credit Suisse said, citing its price-to-book versus return-on-equity model. That’s almost four times the average discount of 37 percent since the brokerage began tracking the data in December 2001. Equities in ASEAN are 17 percent cheaper than the rest of the region.
“In the last eight years, there have been only about six months when the discount was bigger,” the analysts wrote. “Four of the six most undervalued countries are in ASEAN. In contrast, Taiwan is the most overvalued market.”
Credit Suisse added to Indonesia’s share of the model portfolio and pared Taiwan’s position by dropping Taiwan Semiconductor Manufacturing Co (台積電, TSMC), the world’s biggest custom-chip maker.
The stock accounts for almost 8.6 percent of the TAIEX, the biggest by weighting.
The TAIEX has jumped 49 percent this year as closer ties with China drew foreign investors, helping Taiwan’s benchmark index to one of the 10 best performances globally.
Among the five biggest stock markets in ASEAN, only Indonesia has rallied more.
Indonesian coal, palm oil and consumer firms and Singaporean industrial stocks offer the biggest discounts, the analysts said.
The brokerage last month raised its rating on Singapore to “overweight” from “underweight” and upgraded Indonesia to “overweight” from “neutral.”
An improving outlook for earnings in Southeast Asia is supporting Credit Suisse’s upgrade of the region, the report said.
Analysts last month started raising earnings-per-share forecasts for Indonesia, the Philippines, Malaysia and Singapore, while Thailand had upgrades at the start of this month.
Thailand is one of the most “under-owned” among Asian emerging markets, the analysts said.
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