Morgan Stanley Research, ASEAN Equity Strategy Investing to Limit Downside

ASEAN Equity Strategy
Investing to Limit Downside
Risk; Prefer Singapore
Impact on our views: Investors will likely need to protect
themselves from downside risk in an environment of
rising rates and slowing growth. We prefer:1) Singapore
over Thailand over Indonesia; 2) Global Cyclicals over
Domestic Consumption; and 3) Beneficiaries of Rising
Interest Rates.
Further improving DM and deteriorating EM: Our
global economics team upgraded its view on developed
market (DM) economic growth and estimates G10 GDP
growth of 2.9% in 2013 and 3.5% in 2014, and
downgraded its forecasts for EM to 4.8% for 2013 and
4.9% for 2014. Our 2015 earnings are 6-20% below
consensus and our new 12-month forward index targets
imply 6% and 1% upside for MSCI Singapore and MSCI
Thailand, respectively, and 3% downside for MSCI
Indonesia.
Singapore over Thailand over Indonesia: Our
recommendations are also premised on:1) limiting
downside risk; 2) slowing domestic growth versus
stabilizing global growth; and 3) rising rates.
Overweight sectors: Indonesia Industrials and Utilities,
Thailand Energy and Materials,and Singapore Capital
Goods.
Underweight sectors: Indonesia Consumer Staples
and Consumer Discretionary, Thailand Consumer
Staples and Healthcare and Singapore Telecom.
Stock recommendations: ASEAN Focus 20
Theme #1 Global Cyclicals: United Tractors, ITMG,
Harum, PTT, PTTGC, Thai Airways, Esso Thailand,
Noble Group, First Resources, Wilmar International,
Keppel Corp, SIA, ST Engineering.
Theme #2 Rate Beneficiaries: DBS, OCBC, Bank
Mandiri
Theme # 3 Bottom up, attractively valued stocks:
Semen Indonesia, CP Foods, PGas

��

-->