Business Times - 31 Mar 2012
Room for Asian stocks to rise by 10-15%: DBS
By EMILYN YAP
INVESTORS will have to be more discerning about their stock picks from now on. While a tide of liquidity lifted equities across the board in the first quarter, fundamentals will be the key driver ahead.
'The easy money's been made,' said DBS group research head Timothy Wong, who sees a 10-15 per cent upside for Asian equities in the next 12 to 18 months.
Stock markets have rebounded in the last few months as Greece avoided a disorderly default, and as the European Central Bank injected billions of euros into eurozone banks through two rounds of its longer-term refinancing operation.
Since the start of the year, the Straits Times Index has gained almost 12 per cent. Price-to-equity valuations in Asia have improved from last year's trough when eurozone break-up fears were at their strongest, though they remain below average.
Markets will be driven more by fundamentals rather than liquidity as regional economies and earnings estimates improve, said Mr Wong yesterday, at a conference which DBS organised for around 500 of its corporate clients.
He urged investors to focus on fundamentals. Among his recommendations were overweight positions in Thailand, Singapore and Indonesia. The Thai economy will benefit from rebuilding efforts after major floods last year, while Singapore will be on cyclical uptrend, he said.
Indonesia is a wildcard, he added. It is pro-growth, even though there will be near-term overhang from the planned fuel price hike.
In Singapore, 'the key beneficiaries are those sectors that are tied to Asian growth', Mr Wong told the press. Companies to watch include those in the consumer discretionary, oil and gas, offshore and marine, and banking sectors.
DBS is optimistic about Asia's path. The region is re-accelerating, said DBS group research managing director David Carbon yesterday, pointing to surging industrial production numbers, strong consumption levels and other improvements as signs.
More importantly, Asia's pace can continue even as the United States and the eurozone continue to flounder, as long as there are no major external shocks, he stressed. The US economy could return to slower growth in the first quarter while the eurozone could see a mild economic contraction this year, he said.
Publish date: 31/03/12