CNBC2021-07-29 14:54
Most of Southeast Asia may still be struggling to contain Covid-19, but investors are starting to take notice of markets in the region, said HSBC, which named 11 stocks that are attractive.
“We think this interest is justified — these markets offer value and most funds are generally underweight the region,” the bank said in a Tuesday report.
HSBC recommended a so-called “bottom-up” approach in picking stocks to buy, and cited the pandemic as a risk that will hit Southeast Asia’s economic growth and earnings of listed companies.A bottoms-up approach refers to focusing research and analysis on individual stocks, rather than on the macro-economic environment.
The bank picked companies in Indonesia, Singapore and other Southeast Asian countries that are gaining market share in their respective sectors, and offer potential for higher returns given larger investment risks.
Here are the 11 stocks to buy, according to HSBC.
Indonesia
HSBC said it likes Indonesia for several reasons including cheap valuations, and mutual funds’ light positioning, which implies a potential for more money to flow into the market.
Indonesia accounts for four of the bank’s 11 stock picks in Southeast Asia. The stocks are:
- Astra International, a conglomerate with a leading presence in Indonesia’s auto market. A pick up in demand for cars and a government auto-tax exemptions would help allay investor concerns about Covid’s impact on sales, HSBC said.
- PT Telkom, which provides telecommunication services. HSBC said the firm’s net profit is expected to expand by an average 9% annually from the financial year in 2020 through to 2023.
- Elang Mahkota Teknologi, a holding company for several local technology firms. Its e-commerce unit, Bukalapak, is set to be one of the first Indonesian internet companies to list on the local exchange next month.
- Bank Rakyat Indonesia. HSBC said the Indonesian lender is set to increase its dominance in the country’s microfinance segment, where it currently has a market share of around 65%.
Philippines
HSBC said the Philippines has been able to contain the Covid delta variant better than other markets in the region, and reopening the economy could boost stocks.
The bank likes two Philippine stocks:
- Ayala Land, a major property developer in the Philippines, described by HSBC as a bellwether stock. The bank said it is constructive on the property sector.
- Monde Nissin, a food and beverage company. HSBC said the company offers “unique exposure” to the trend of alternative meat through its ownership of Quorn, which is one of the largest player in the segment globally.
Singapore
Singapore is the best-performing Southeast Asian market so far this year. As such, valuations are not “as cheap” as they were at the start of 2021, said HSBC.
Still, foreign funds remain “underweight” on Singapore and that could support stocks, the bank said. It likes three stocks from the city-state:
- Sea Ltd, a U.S.-listed internet company with presence in gaming, e-commerce and payments. HSBC said the firm’s e-commerce unit, Shopee, is well-positioned to strengthen its market leadership across Southeast Asia.
- Capitaland, a major property firm that is being restructured to separate its development and investment businesses. The eventual listed entity will be a global real estate investment manager, which HSBC predicted would do well.
- Sembcorp Industries, an energy and urban development company. HSBC said the company is a key beneficiary of Southeast Asia’s transition to renewable energy.
Thailand and Vietnam
Rounding up its top picks for Southeast Asia, HSBC chose one stock from Thailand and one from Vietnam:
- Thai Beverage, a Bangkok-based drinks producer, is listed in Singapore. The bank said it likes the company’s dominance in the alcohol market in Thailand.
- Vietnam Dairyor Vinamilk, which has a market share of over 50% in dairy milk in Vietnam. HSBC said the Vietnam-listed stock provides one of the best proxies to the country’s consumer sector.
source?CNBC