■ China and Thai consumer sectors have rolled over. India consumer
next? We are generally not fans of the expensive Consumer stocks,
particularly those associated with consensus EPS downgrades. Figure 2
under focus charts highlights that the MSCI China Consumer Staples has
been underperforming the MXASJ (MSCI Asia ex-Japan) since November
2011. Figure 3 highlights that the MSCI Thai Consumer Staples has been
underperforming the MXASJ since April 2013. In both these instances, the
sectors started to underperform as EPS downgrades started. We wonder
whether the India Consumer sector is next as we are starting to see
consensus EPS revisions roll over. Figures 1, 8 and 9 highlight that the peak
for 2013E consensus EPS for Hindustan Unilever was in January 2013 and
for ITC in February 2013.
■ We continue to OVERWEIGHT stocks with US exposure and FX tailwind.
As highlighted in our report of 4 July—Cheap stocks with US exposure, we
continue to suggest switching into and/ or OVERWEIGHT cheap stocks with
US exposure and FX tailwind such as Indian IT and Korean autos.
■ Top picks in India. The price-to-book gap between cyclicals (defined as
Tech, Consumer Cyclicals, Energy, Industrials, Materials) and defensives
(defined as Consumer Staples, Telcos, Utilities) in India is -6.9x. With the
gap in India the biggest in the region, top stock picks in India from a regional
perspective are HCL Tech, Wipro, Tata Motors and Reliance Industries
��
next? We are generally not fans of the expensive Consumer stocks,
particularly those associated with consensus EPS downgrades. Figure 2
under focus charts highlights that the MSCI China Consumer Staples has
been underperforming the MXASJ (MSCI Asia ex-Japan) since November
2011. Figure 3 highlights that the MSCI Thai Consumer Staples has been
underperforming the MXASJ since April 2013. In both these instances, the
sectors started to underperform as EPS downgrades started. We wonder
whether the India Consumer sector is next as we are starting to see
consensus EPS revisions roll over. Figures 1, 8 and 9 highlight that the peak
for 2013E consensus EPS for Hindustan Unilever was in January 2013 and
for ITC in February 2013.
■ We continue to OVERWEIGHT stocks with US exposure and FX tailwind.
As highlighted in our report of 4 July—Cheap stocks with US exposure, we
continue to suggest switching into and/ or OVERWEIGHT cheap stocks with
US exposure and FX tailwind such as Indian IT and Korean autos.
■ Top picks in India. The price-to-book gap between cyclicals (defined as
Tech, Consumer Cyclicals, Energy, Industrials, Materials) and defensives
(defined as Consumer Staples, Telcos, Utilities) in India is -6.9x. With the
gap in India the biggest in the region, top stock picks in India from a regional
perspective are HCL Tech, Wipro, Tata Motors and Reliance Industries
India Consumer sector – the last bastion rolling
over?
China and Thai Consumer sectors have rolled over. India Consumer next? We are
generally not fans of the expensive Consumer stocks, particularly those associated with
consensus EPS downgrades.
Figure 2 under focus charts highlights that the MSCI China Consumer Staples has been
underperforming the MXASJ (MSCI Asia ex-Japan) since November 2011. Figure 3
highlights that the MSCI Thai Consumer Staples has been underperforming the MXASJ
since April 2013.
In both these instances, the sectors started to underperform as EPS downgrades started.
We wonder whether the India Consumer sector is next as we are starting to see
consensus EPS revisions roll over. Figures 1, 8 and 9 highlights that the peak for 2013E
consensus EPS for Hindustan Unilever was end-January 2013, and for ITC, end-February
2013.
Top picks in India. With the price-to-book gap between cyclicals and defensives the
biggest in India among all the markets in the region, our top stock picks in India from a
regional perspective are HCL Tech, Wipro, Tata Motors and Reliance Industries.
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