Get set for a liquidity rally - the DBS Vickers Securities Equities ...

Regional ETF Focus
Get set for a liquidity rally
Thai P/E band
700
600
500
400
300
200
100
700
600
500
400
300
200
100
Malaysia – market uptrend intact
DBS Malaysia strategist believes that the market uptrend is
intact and is targeting 1650 on KLCI by end 2011 –11%
upside from current levels. Budget 2011 is private sector
friendly and Malaysia’s PM reaffirmed commitment to the
RM40bn high impact MRT project that will start in 2011.
We believe the project, if completed, will be instrumental in
transforming Malaysia to a high income nation and benefit
many private sectors.
ASEAN – back to 1990’s
9
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: Datastream
Indonesia – no overheating in the stock market
Source: DATASTREAM
Although it has re-rated to 14.3x we don’t see the JCI
market being overheated. JCI’s performance to date is in
line with past years performance and flows to Indonesia
weren’t any larger. Notably this year we see a lot of capital
raising to absorb the demand, both domestic and foreign,
which should bode well for the longer sustainability of the
rally.
With the index now trading at 14.8x 12-month forward P/E
we expect consolidation in the market before the next leg
up. Accordingly our conservative approach to valuations of
14x P/E (no re-rating) and 20% growth could bring the JCI
to 4125 by the end of 2011, which represents only 10% rise
from current levels.
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We believe that ASEAN markets will continue to outperform
the Asia ex-Japan benchmark led by many investment
initiatives, strong domestic demand and a low interest rate
environment. A diversified portfolio can be achieved
through investing in CIMB ASEAN40 ETF listed in Singapore.
Hong Kong / China to continue to outperform
China and China related H-share index outperformed the
regional index by 3-9% and the 2823 HK now trades at a
premium of 8% to its NAV.
We continue to see that China A- share should benefit
directly from RMB revaluation. China related ETFs continue
to draw interest, with a combined turnover of US$360mil a
day among those listed in Hong Kong and Singapore.
The A-share ETF traded at a premium to NAV, reflecting
strong demand for A-shares amid limited supply. The Hang
Seng Index A-H premium index has rebounded from the low
since we highlighted it in our last report, but it’s still about
20% from the high, suggesting that A-shares still look
attractive.
Meanwhile the index heavyweights like the Banks and Oil
companies have been lagging in terms of performance. We
expect easing concerns on policy uncertainty and firming oil
prices to benefit these two sectors; and an influx of liquidity
to benefit the big caps.
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