Indonesian Stock Market Overweight by Credit Suisse

Thailand, Indonesia and the Philippines stock markets, or TIPs,  still having potential upside. The three markets had started the year as the most undervalued according to Credit Suisse’s model, Sakthi Siva wrote in the report.

She continues to “overweight” the three markets, saying that several industries remain “undervalued.” In Thailand, which is still among the four cheapest in Asia, investors can find the biggest discounts in energy and financial companies, according to the brokerage. Telecommunications stocks offer the biggest discount in the Philippines while coal is the only industry trading at a discount in Indonesia, the strategist said.

 

Investors should reduce holdings in the “overvalued” industries in Thailand, Indonesia and the Philippines following a rally that helped the markets to the biggest gains in Asia this year, Credit Suisse Group AG said. 

The Jakarta Composite Index reached a record high yesterday, having advanced 32 percent this year, the best performer among the 15 largest Asia Pacific markets. It’s followed by a 31 percent gain in the Philippine Stock Exchange Composite Index, also at a record today, and a 26 percent rally in Thailand’s SET Index, which this month reached the highest since November 1996. 

Thailand, Indonesia and the Philippines, or TIPs, “are the best performers year-to-date and more importantly above their 2007 highs,” Sakthi Siva wrote in the report. “We suggest investors take profits in the most overvalued sectors.” 

Consumer staples, consumer cyclicals and industrials are the three most overvalued industries in Indonesia, based on a model that compares price to book value against return on equity, said Siva, who was ranked first for equity strategy in Institutional Investor’s 2010 Asian poll. Property stocks are the most expensive in the Philippines, while consumer cyclicals are the most overvalued in Thailand, according to the report.

‘Resilient Markets’

Stock markets in Thailand, Indonesia, the Philippines and Malaysia have been “remarkably resilient” and investor interest may increase, drawn by Southeast Asia’s economic growth and an equities rally, JPMorgan Chase & Co. wrote in an Aug. 10 report. The region will “remain a magnet for inflows” after having outperformed this year, the brokerage also said on Sept. 3.