Nomura: Strategy | ASEAN 2011 Outlook

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 Action
Viewed as an economic region, ASEAN has a GDP of US$1.5tn and a population
of 590mn. With an increasing middle-income population and plentiful natural
resources, we think four themes will play out for ASEAN — consumption,
infrastructure, commodities, and M&A. We believe banks, consumer, and
commodity-and infrastructure-related stocks will benefit most.
Anchor themes
Rising middle-income populations, in addition to increasing rural incomes due to
firmer commodity prices, will underpin domestic consumption in our view.
We believe infrastructure investments in ASEAN will lift ASEAN’s growth potential
and facilitate the creation of a single market by 2015.

ASEAN: four themes for 2011
 ASEAN — combined GDP of US$1.5tn
We think ASEAN’s medium-term prospects are underpinned by an increasing
middle-income population, abundant natural resources, and pro-growth policies.
Collectively, ASEAN’s GDP of US$1.5tn is ahead of both Russia’s and India’s.
 Theme 1: increase in middle-income population supports
consumption
Our economists estimate that ASEAN’s middle-class population could reach
300mn by 2014, which should underpin consumption growth. Consumer
companies (Astra, QSR, F&N, Genting Malaysia) and banks (Maybank, OCBC,
Mandiri) look well positioned to benefit from the consumption theme.
 Theme 2: lifting growth through infrastructure
Indonesia is investing up to US$150bn in infrastructure to lift its growth potential,
while Malaysia plans to invest up to RM58.4bn to shift towards a higher-income
economy. Thailand’s Thai Khemkhaeng (Stimulus Package 2) has allocated
THB571bn for logistics and transportation. Material suppliers (Holcim, Siam
Cement) and regional banks (CIMB, Maybank, OCBC) could benefit from the
infrastructure theme.
 Theme 3: ASEAN well endowed with resources
Indonesia, Malaysia, and Thailand are rich in agricultural and mineral resources.
With commodity prices likely remaining on an uptrend, plantation and coal plays in
ASEAN are beneficiaries. We like Golden Agri, Indofood Agri, Sime Darby, London
Sumatra, and Adaro.
 Theme 4: more cross-border M&A within ASEAN
We are likely to see increased M&A activity as ASEAN companies see acquisition
opportunities within Southeast Asia. Companies that have been active on the M&A
front who may continue or who have been reported to be interested in making
acquisitions include F&N, DBS, PTT Group, Semen Gresik, Axiata, and Maybank.