Recent reports from several analysts reflect bullishness on Asian equities, with UBS Investment Bank urging investors to be ‘overweight’ on the stock markets of India, Hong Kong and China.
In another report from Nomura Singapore, analyst Lim Jit Soon said he expects 10 percent to 15 percent market returns in Singapore next year, supported by attractive-looking valuations, a strong currency and the persistence of negative real interest rates.
“As one of the few countries in Asia unlikely to impose capital controls, the Singapore market is poised to benefit from the easier global liquidity environment in 2011 against the backdrop of what look to be attractive valuations (14x P/E, 11 percent market earnings per share growth and dividend yield of 3 percent),” said Mr. Lim.
A major re-rating driver next year will be the reflation or the act of stimulating the economy by cutting taxes or raising money supply, added Mr. Lim. This will benefit the banks, commodities and commodity-related sectors, and commercial real estate segment.
He expects banks to continue to re-rate from their undervalued positions, supported by steady net interest margins and regional growth next year, tagging a ‘buy’ call on DBS and OCBC.
In the real estate sector, Mr. Lim advised investors to stick to the office segment, which will likely benefit from liquidity inflows, continued low interest rates and cyclical recovery.
Among his top picks include Suntec Reit, CapitaCommercial Trust and K-Reit. However, Mr. Lim warned that policy overhang in the residential segment could weaken developers’ share price performance.
UBS attributed its bullish view on Asia to attractive valuation and realistic earnings forecasts.