Singapore: China, India and Singapore are Asia’s best bets for stocks this year as markets struggle to rebound from the rout in 2008, HSBC Holdings Plc. said.
Asian equity markets will probably end the year within 10% of their current levels and a so-called bull market will likely only start in 2010, Garry Evans, HSBC’s Hong Kong-based strategist, said. The brokerage last week raised India’s rating to “overweight” from “neutral”, saying valuations in the country and in China and Singapore are attractive.
The MSCI Asia-Pacific Index fell 43% last year, the largest drop since the measure was created in 1987. Half of the region’s 12 MSCI country indices posted their worst years on record as the deepening global recession weighed on earnings.
“Equity markets are going to be very volatile this year and you’re going to get upswings and then corrections,” Evans said on Tuesday. “What I’m suggesting that you should do is buy large-cap, blue-chip stocks.”
The bellwether Indian equity index, the Sensex, is valued at 9.4 times reported earnings, down from as much as 31 times a year earlier, according to Bloomberg data. China’s CSI 300 Index is trading at 13 times earnings, almost one-quarter of its valuation a year earlier, while Singapore’s Straits Times Index is at six times reported earnings, the lowest in Asia.
Investors should own shares of Infosys Technologies Ltd, India’s second largest computer services provider, and Reliance Industries Ltd, the country’s biggest non-state company, HSBC recommended in a report, first released to investors on 6 January.
Corporate earnings in India would probably remain unchanged in the current fiscal year and grow as much as 10% in the 12 months ending March 2010, the brokerage estimated. Investors would also likely shrug off concerns of further corporate fraud after Satyam Computer Systems Ltd’s founder disclosed last week he had falsified accounts, Evans said.
“The long-term story for India is still in place,” the strategist said. “Satyam will probably prove to be a one-off. The vast majority of Indian companies are still better run than the average.”
Infosys on Tuesday said third quarter profit jumped 33% to a record after winning outsourcing orders from clients seeking to cut costs amid the global recession.