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LOSO
55% To 87% Upside Potential For Asia Ex Japan Over Next 3 years !!!
« เมื่อ: สิงหาคม 09, 2003, 12:07:12 PM » ตอบโดยอ้างถึงข้อความ
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16 Jul 2003
55% To 87% Upside Potential For Asia Ex Japan Over Next 3 years
Our Research Desk thinks Asia ex Japan market may rally between 55% and 87% over the next few years.
by Suryati Mahmud and Wong Sui Jau
ASIA EX JAPAN MARKET
MAY RISE BETWEEN 55% & 87%
OVER NEXT 3 YEARS
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All Asia ex Japan stock markets have recorded positive returns year-to-date (as at 4 Jul 2003). Even China, Taiwan, Hong Kong and Singapore, which were affected by the SARS outbreak, saw their markets rally. Hong Kong, for example, is up 3.4% year-to-date. But its performance pales in comparison with its peers. Over half of the markets in the region have posted double-digit returns over this period. The top performer is Thailand, which is up a whopping 41%. See table below.
YEAR-TO-DATE PERFORMANCE OF ASIA EX JAPAN MARKETS
Market Performance (%)
Thailand 41.0
China 34.2
The Philippines 25.3
Indonesia 23.2
Taiwan 15.7
Malaysia 12.2
Singapore 10.8
South Korea 9.1
India 7.3
Hong Kong 3.4
Source: iFAST Financial compilations, based on index levels as at 4th Jul 2003.
As measured by the MSCI Asia ex Japan Index, the region as a whole is up 12% year-to-date (as at 4 Jul 2003). And it seems that investors in the region are putting the SARS outbreak behind them. The MSCI Asia ex Japan Index has been rising after dropping to a low of 162.3 points in late April. Markets that were hit during the SARS outbreak such as Singapore and Hong Kong also seem to have recovered from this setback. See the following charts.
Source: Bloomberg
Source: Bloomberg
ASIA EX JAPAN STILL ATTRACTIVELY VALUED
Despite the run-up that Asia ex Japan markets have enjoyed, we still think that the region is attractively valued. The 2003 and 2004 forecast price-earnings (PE) ratios for the various markets continue to be in the low- to mid-teens or single-digit figures. PE ratio is a common way of valuing the attractiveness of a market. The lower the figure, the more attractive the market. South Korea and Thailand continue to be among the cheapest with 2003 forecast PE ratios of 6.8 times and 10.8 times respectively. Indonesia is another market that has a very low forecast PE ratio. It is trading at 7.6 times for 2003 and 5.6 times for 2004. And as a region, Asia ex Japan is trading at 2003 and 2004 forecast PE ratios of 11.6 times and 10.2 times. See table below.
FORECAST PE RATIOS OF ASIA EX JAPAN MARKETS FOR 2003 & 2004
Market 2003 Forecast
PE Ratio
2004 Forecast
PE Ratio
Thailand 10.8 8.8
China 10.1 9.5
The Philippines 12.8 12.6
Indonesia 7.6 5.6
Taiwan 16.3 14.5
Malaysia 14.5 13.0
Singapore 14.5 11.5
South Korea 6.8 6.2
India 10.3 8.8
Hong Kong 14.9 14.3
Asia ex Japan 11.6 10.2
Source: iFAST Financial compilations, based on index levels as at 4th Jul 2003.
WHERE WE THINK ASIA EX JAPAN IS HEADED
Going forward, we believe that Asia ex Japan will continue to do well over the next 3 to 5 years. There are several reasons why we remain upbeat about the region.
First, as we have mentioned above, the valuations of many Asia ex Japan markets are still relatively low compared with what they have been historically trading at. For example, most Asian markets have historically traded at forecast PE ratios that range from the mid- to high-teens.
Second, fears over SARS have subsided. The World Health Organisation recently removed Taiwan and China off its list of areas with recent local transmission of SARS.
Third, Asia ex Japan economies will continue to post good economic growth vis-à-vis other regions despite the SARS setback. The Asian Development Bank, for example, expects the region's economy to expand 5.3% in 2003.
Fourth, as the US economy gradually gets back on track, export-dependent Asia is expected to benefit because the US is one of its major trading partners.
Turning to how Asia ex Japan markets will perform as a whole, we think that they may post double-digit returns over the next 3 years. We have come up with 2 estimates - a conservative forecast and a bullish one.
In the conservative forecast, we have the earnings of the region's companies growing 21% in 2003, 12.1% in 2004 and 15% in 2005. The projection for 2003 is much higher because earnings have been hammered down drastically over the past few years and hence, are coming off a low base. And our earnings growth estimates for 2004 and 2005 are at the lower end of our earnings growth projections for the next 2 years. Based on these estimates and the region's valuations, our conservative forecast sees Asia ex Japan markets rising by 55% over the next 3 years. In the bullish forecast, we see companies in the region posting more robust earnings. We expect the earnings to rise 25% in 2003, 17% in 2004, and 20% in 2005. This means that Asia ex Japan has an upside potential of 87% over the next 3 years. See tables below.
EARNINGS GROWTH OF ASIA EX JAPAN MARKETS FOR 2003 & 2004
Market 2003 Forecast
Earnings Growth (%)
2004 Forecast
Earnings Growth (%)
Thailand 44.4 23.1
China 5.1 6.6
The Philippines 16.7 1.5
Indonesia 24.1 36.9
Taiwan 62.3 12.4
Malaysia 7.4 11.5
Singapore 21.9 26.3
South Korea 12.7 8.5
India 8.4 15.1
Hong Kong 2.7 4.4
Asia ex Japan 21 to 25 12.1 to 17
Source: iFAST Financial compilations.
OUR PROJECTIONS FOR ASIA EX JAPAN
2003 Forecast
Earnings
Growth 2004 Forecast
Earnings
Growth 2005 Forecast
Earnings
Growth Market
Upside
Potential
Over 3 Years
Conservative Forecast 21% 12.1% 15% 55%
Bullish Forecast 25% 17% 20% 87%
Source: iFAST Financial compilations.
RISKS & CONCLUSION
There are several risks that investors need to be aware of when investing in Asia ex Japan. It is important to understand that the region's markets are very volatile and that the share price fluctuations can be steep. Another factor is political risk. For example, there have recently been calls for Hong Kong's Chief Executive Tung Chee Hwa to reshuffle his cabinet or resign. Meanwhile, in Malaysia, Deputy Prime Minister Abdullah Ahmad Badawi is set to take over Dr Mahathir Mohamad as Prime Minister in October. But we do not see these situations getting out of hand and think that they will have little impact on stock market movements in the medium-term. Other risks include a sudden terrorist attack in the region and a drastic economic contraction in the US economy. On the latter, we think there'll be a gradual economic recovery in the US over the next few years as business confidence and IT spending improve.
In conclusion, now that fears over the war in Iraq and SARS have died down, we expect consumer spending and tourism in Asia ex Japan to recover. Including an improvement in exports, we expect these factors to set the region's economy back on track for recovery. We also believe that Asian economies have higher economic growth potential. We think that Asia ex Japan will outperform other regional markets in the long run because many Asian stocks are still attractively valued vis-à-vis their counterparts elsewhere. Our recommended Asia ex Japan equity funds are Aberdeen Pacific Equity and First State Asia-Pacific Growth. We also like the APS Alpha Fund, an Asia ex Japan fund that will be launched on 23 July.
LOSO
Re:55% To 87% Upside Potential For Asia Ex Japan Over Next 3 years !!!
« ตอบกระทู้ #1 เมื่อ: สิงหาคม 09, 2003, 12:10:04 PM » ตอบโดยอ้างถึงข้อความ
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http://www.fundsupermart.com/main/resea ... cleNo=1072
55% To 87% Upside Potential For Asia Ex Japan Over Next 3 years !!!
« เมื่อ: สิงหาคม 09, 2003, 12:07:12 PM » ตอบโดยอ้างถึงข้อความ
--------------------------------------------------------------------------------
16 Jul 2003
55% To 87% Upside Potential For Asia Ex Japan Over Next 3 years
Our Research Desk thinks Asia ex Japan market may rally between 55% and 87% over the next few years.
by Suryati Mahmud and Wong Sui Jau
ASIA EX JAPAN MARKET
MAY RISE BETWEEN 55% & 87%
OVER NEXT 3 YEARS
--------------------------------------------------------------------------------
All Asia ex Japan stock markets have recorded positive returns year-to-date (as at 4 Jul 2003). Even China, Taiwan, Hong Kong and Singapore, which were affected by the SARS outbreak, saw their markets rally. Hong Kong, for example, is up 3.4% year-to-date. But its performance pales in comparison with its peers. Over half of the markets in the region have posted double-digit returns over this period. The top performer is Thailand, which is up a whopping 41%. See table below.
YEAR-TO-DATE PERFORMANCE OF ASIA EX JAPAN MARKETS
Market Performance (%)
Thailand 41.0
China 34.2
The Philippines 25.3
Indonesia 23.2
Taiwan 15.7
Malaysia 12.2
Singapore 10.8
South Korea 9.1
India 7.3
Hong Kong 3.4
Source: iFAST Financial compilations, based on index levels as at 4th Jul 2003.
As measured by the MSCI Asia ex Japan Index, the region as a whole is up 12% year-to-date (as at 4 Jul 2003). And it seems that investors in the region are putting the SARS outbreak behind them. The MSCI Asia ex Japan Index has been rising after dropping to a low of 162.3 points in late April. Markets that were hit during the SARS outbreak such as Singapore and Hong Kong also seem to have recovered from this setback. See the following charts.
Source: Bloomberg
Source: Bloomberg
ASIA EX JAPAN STILL ATTRACTIVELY VALUED
Despite the run-up that Asia ex Japan markets have enjoyed, we still think that the region is attractively valued. The 2003 and 2004 forecast price-earnings (PE) ratios for the various markets continue to be in the low- to mid-teens or single-digit figures. PE ratio is a common way of valuing the attractiveness of a market. The lower the figure, the more attractive the market. South Korea and Thailand continue to be among the cheapest with 2003 forecast PE ratios of 6.8 times and 10.8 times respectively. Indonesia is another market that has a very low forecast PE ratio. It is trading at 7.6 times for 2003 and 5.6 times for 2004. And as a region, Asia ex Japan is trading at 2003 and 2004 forecast PE ratios of 11.6 times and 10.2 times. See table below.
FORECAST PE RATIOS OF ASIA EX JAPAN MARKETS FOR 2003 & 2004
Market 2003 Forecast
PE Ratio
2004 Forecast
PE Ratio
Thailand 10.8 8.8
China 10.1 9.5
The Philippines 12.8 12.6
Indonesia 7.6 5.6
Taiwan 16.3 14.5
Malaysia 14.5 13.0
Singapore 14.5 11.5
South Korea 6.8 6.2
India 10.3 8.8
Hong Kong 14.9 14.3
Asia ex Japan 11.6 10.2
Source: iFAST Financial compilations, based on index levels as at 4th Jul 2003.
WHERE WE THINK ASIA EX JAPAN IS HEADED
Going forward, we believe that Asia ex Japan will continue to do well over the next 3 to 5 years. There are several reasons why we remain upbeat about the region.
First, as we have mentioned above, the valuations of many Asia ex Japan markets are still relatively low compared with what they have been historically trading at. For example, most Asian markets have historically traded at forecast PE ratios that range from the mid- to high-teens.
Second, fears over SARS have subsided. The World Health Organisation recently removed Taiwan and China off its list of areas with recent local transmission of SARS.
Third, Asia ex Japan economies will continue to post good economic growth vis-à-vis other regions despite the SARS setback. The Asian Development Bank, for example, expects the region's economy to expand 5.3% in 2003.
Fourth, as the US economy gradually gets back on track, export-dependent Asia is expected to benefit because the US is one of its major trading partners.
Turning to how Asia ex Japan markets will perform as a whole, we think that they may post double-digit returns over the next 3 years. We have come up with 2 estimates - a conservative forecast and a bullish one.
In the conservative forecast, we have the earnings of the region's companies growing 21% in 2003, 12.1% in 2004 and 15% in 2005. The projection for 2003 is much higher because earnings have been hammered down drastically over the past few years and hence, are coming off a low base. And our earnings growth estimates for 2004 and 2005 are at the lower end of our earnings growth projections for the next 2 years. Based on these estimates and the region's valuations, our conservative forecast sees Asia ex Japan markets rising by 55% over the next 3 years. In the bullish forecast, we see companies in the region posting more robust earnings. We expect the earnings to rise 25% in 2003, 17% in 2004, and 20% in 2005. This means that Asia ex Japan has an upside potential of 87% over the next 3 years. See tables below.
EARNINGS GROWTH OF ASIA EX JAPAN MARKETS FOR 2003 & 2004
Market 2003 Forecast
Earnings Growth (%)
2004 Forecast
Earnings Growth (%)
Thailand 44.4 23.1
China 5.1 6.6
The Philippines 16.7 1.5
Indonesia 24.1 36.9
Taiwan 62.3 12.4
Malaysia 7.4 11.5
Singapore 21.9 26.3
South Korea 12.7 8.5
India 8.4 15.1
Hong Kong 2.7 4.4
Asia ex Japan 21 to 25 12.1 to 17
Source: iFAST Financial compilations.
OUR PROJECTIONS FOR ASIA EX JAPAN
2003 Forecast
Earnings
Growth 2004 Forecast
Earnings
Growth 2005 Forecast
Earnings
Growth Market
Upside
Potential
Over 3 Years
Conservative Forecast 21% 12.1% 15% 55%
Bullish Forecast 25% 17% 20% 87%
Source: iFAST Financial compilations.
RISKS & CONCLUSION
There are several risks that investors need to be aware of when investing in Asia ex Japan. It is important to understand that the region's markets are very volatile and that the share price fluctuations can be steep. Another factor is political risk. For example, there have recently been calls for Hong Kong's Chief Executive Tung Chee Hwa to reshuffle his cabinet or resign. Meanwhile, in Malaysia, Deputy Prime Minister Abdullah Ahmad Badawi is set to take over Dr Mahathir Mohamad as Prime Minister in October. But we do not see these situations getting out of hand and think that they will have little impact on stock market movements in the medium-term. Other risks include a sudden terrorist attack in the region and a drastic economic contraction in the US economy. On the latter, we think there'll be a gradual economic recovery in the US over the next few years as business confidence and IT spending improve.
In conclusion, now that fears over the war in Iraq and SARS have died down, we expect consumer spending and tourism in Asia ex Japan to recover. Including an improvement in exports, we expect these factors to set the region's economy back on track for recovery. We also believe that Asian economies have higher economic growth potential. We think that Asia ex Japan will outperform other regional markets in the long run because many Asian stocks are still attractively valued vis-à-vis their counterparts elsewhere. Our recommended Asia ex Japan equity funds are Aberdeen Pacific Equity and First State Asia-Pacific Growth. We also like the APS Alpha Fund, an Asia ex Japan fund that will be launched on 23 July.
LOSO
Re:55% To 87% Upside Potential For Asia Ex Japan Over Next 3 years !!!
« ตอบกระทู้ #1 เมื่อ: สิงหาคม 09, 2003, 12:10:04 PM » ตอบโดยอ้างถึงข้อความ
--------------------------------------------------------------------------------
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http://www.fundsupermart.com/main/resea ... cleNo=1072