Southeast Asian Stocks Get Singapore Boost, Credit Suisse Says

July 15

Southeast Asian stocks may gain favor among investors at the expense of other regional markets as Singapore’s economy rebounds, Credit Suisse Group AG said.

Association of Southeast Asian Nations stocks are trading at a 14 percent discount to the rest of Asia, more than the historical average of 5 percent, Credit Suisse analysts Sakthi Siva and Kin Nang Chik wrote in a report. Singapore’s economy last quarter expanded for the first time in a year, by 20.4 percent from the previous three months, data showed yesterday.

“Singapore’s positive GDP surprise could act as a catalyst for a broader switch into Asean,” the analysts wrote. “While the rise was driven by biomedicals and electronics, it does highlight how quickly Asean is emerging from recession.”

Indonesia’s Jakarta Composite Index has gained 52 percent this year, the only Southeast Asian benchmark gauge among the world’s best performers this year. Other Asian indexes among the top 10 gainers include China, Sri Lanka, Taiwan and India, according to 88 tracked by Bloomberg globally.

Credit Suisse last month advised investors to trim Taiwan holdings and to shift into Southeast Asia.

Singapore’s government raised its economic forecast for 2009, saying that the economy will shrink 4 percent to 6 percent, less than an earlier forecast for a contraction of as much as 9 percent.

Credit Suisse also raised its estimates for the island’s $161 billion economy this year, saying growth may contract 3.9 percent. The brokerage had previously predicted that gross domestic product may contract 6.5 percent, analysts Cem Karacadag and Kun Lung Wu said in a separate report today.

Relative to Taiwan, Southeast Asia is trading at a discount of 138 percent, near the record low of 159 percent seen in March, said Siva and Chik, who compared the markets’ relative price-to- book ratios against their returns on equity.

Banks in Singapore and Thailand, Philippines telecommunications stocks as well as so-called cyclical companies in Indonesia offer the largest discounts in Southeast Asia, the analysts added.

Source: http://www.bloomberg.com/apps/news?pid=20601080&sid=aiVtkxC0WWWk