Jeffrey Hodgson, Reuters
Hong Kong: Global stock investors looking to Asia should favour Thailand, Indonesia and the Philippines given their lower valuations, a senior executive with the fund arm of UK insurer Prudential Plc said on Monday.
Indian and mainland Chinese shares should be approached with caution because their prices on average are getting lofty, added Guy Strapp, regional head of investment management in Asia for Prudential Asset Management.
Prudential’s Asian fund operation had 29.2 billion pounds ($58.26 billion or Rs2,36,768 crore) in assets under management at the end of last year, making it one of the region’s largest money managers.
“Thailand, Indonesia and the Philippines are all reasonably attractive in their own right. Thailand of those three is probably the most attractive on a valuation basis,” he said.
“Indonesia is attractive because of some of those macro growth factors.”
The former BT Financial Group and Bank of America executive said South Korea and Taiwan were also attractive, even though a stronger won had dampened prospects for South Korean exporters.
By contrast, he said the firm was underweight Indian shares and wary about the rally in mainland Chinese stocks.
Indian shares shares rose almost 47% last year and reached a lifetime high on 9 February before paring gains. China’s main stock index, the Shanghai Composite Index, rose 130% last year and hit a new record high on 30 April.
A report from Citigroup earlier this month estimated India stocks were trading at 18 times 2007 earnings. This compared with 10.2 times in Thailand, 11.8 times in South Korea, 13.6 times in Taiwan and 13.8 times for Indonesia.
Strapp, who joined Prudential in January, said markets that the firm thinks are fairly or fully valued include Singapore, Malaysia and Hong Kong.
The fund management executive said that stock markets in Asia on average still looked “reasonably attractive” compared to fixed-income markets given a decline in yields and tightening in spreads.
“Generally inflation and interest rates across the region are quite low, so the comparative opportunity between equities and cash/fixed income means that equity is more attractive,” he said.