Largest ASEAN Value Stocks Edged Ahead of Region Over Past 12M

• The FTSE Value-Stocks ASEAN Index has generated a 12% total return in SGD terms over the past 12 months, outperforming both the FTSE/ASEAN 40 Index with a 10% total return and FTSE ASEAN All-Share Index with a 3% total return.

• The FTSE Value-Stocks ASEAN Index is comprised of the largest capitalised stocks of the FTSE Global All Cap Index that meet three sets of value-investing screening criteria, namely Contrarian, Quality & Valuation screenings which are then ranked by lowest P/E Ratio.

• Singapore’s 10 constituents of the FTSE Value-Stocks ASEAN Index have averaged a 9% total return over the past 12M, ranging from -12% for Jardine C&C to 30% for DBS Group Holdings. In May 2018, two stocks, A-REIT and Venture, re-joined the Index.

The FTSE Value-Stocks ASEAN Index is currently valued at 12.5 times earnings with a trailing 12 month dividend yield of 3.9%. This compares to the FTSE/ASEAN 40 Index which is valued at 14.3 times earnings and a trailing 12 month dividend yield of 3.5%. Both Indices maintain a similar Return on Equity (“ROE”) with the FTSE Value-Stocks ASEAN Index at 12.4% and the FTSE/ASEAN 40 Index at 12.2%.

The SIAS Investment Guide Book (click here) defines Value Investing as the discipline of buying securities and holding them until their actual value is realised. The Guide further notes that the disciplined pursuit of bargains makes value investing a risk-averse approach, with the primary goal of value investors to avoid losing money. The Guidebook also provides an overview of the Warren Buffest methodology to investing, while acknowledging in practice, it is not easy to follow.

The constituents of the FTSE Value-Stocks ASEAN Index pass a proprietary value screening process which includes valuation, quality and contrarian factors. As illustrated below, the FTSE Value-Stocks ASEAN Index was a also a stronger segment of the regional stock market in the three timeframes presented.

The FTSE Value-Stocks ASEAN Index consists of approximately 50 value stocks amongst the most liquid and tradable companies listed on the Indonesia Stock Exchange, Bursa Malaysia, the Philippine Stock Exchange, the Singapore Exchange and the Stock Exchange of Thailand. To see more details click here.

Amongst the current stocks that make up the FTSE Value-Stocks ASEAN Index, the 10 Singapore-listed constituents have averaged a 0.7% total return in the 2018 year-to-date and an 8.8% total return over the past 12 months. Average 10 year total returns of the current 10 constituents came to 155.0%, which annualised was 9.9%.

As tabled below, the performances of the current 10 SGX-listed constituents of the FTSE Value-Stocks ASEAN Index were led by three different stocks for each of the three time periods. For the 2018 year-to-date ComfortDelGro Corporation was the strongest gainer, for the 12 months DBS Group Holdings was the strongest gainer, while over the full 10 year duration Mapletree Logistics Trust was the strongest gainer.

To see more details on each stock below, click on the stock name.

Source: Bloomberg & SGX StockFacts (data as of 10 August 2018) *Note total return from 20 October 2010

In May 2018 Ascendas REIT and Venture Corporation re-joined the FTSE Value-Stocks ASEAN, while Keppel Corporation and Sembcorp Industries were deleted from the Index.

FTSE Value-Stocks ASEAN Index Methodology

The FTSE Value-Stocks ASEAN Index is a value-based index designed by Value Partners Index Services Limited (“VP”) and created, calculated and maintained by FTSE International Limited.

Each security must be a current constituent of the FTSE Global All Cap Index. In the Index screening, VP will screen each security in the ASEAN Investable Universe and each will be ranked by three sets of value-investing screening criteria, namely Contrarian, Quality and Valuation screenings. Note the largest capitalised stocks that meet the criteria will be selected.

From the ASEAN Investable Universe, the companies passing through all these screenings are ranked by PE ratio and the companies with the lowest PE ratio are selected to be the constituents of the Index. The Index is free float weighted and constituent stocks are capped at 5% weightings to avoid over-concentration in any one stock.

For more details on the Index methodology, click here.

FTSE Value-Stocks ASEAN Index Screening Constituents

As discussed above, value-investing screening criteria include Contrarian, Quality and Valuation screenings. As outlined in the Index ground rules:

• Contrarian screening aims to avoid following the herd. Companies in the investable universe covered by more than 10 analysts in the forecast recommendation with a buy recommendation from over 80% of analysts will be screened out.

• Quality screening is applied to avoid value traps, based three fundamental factors: 3-year Average Return on Equity, Operating Profit Margin and Net Gearing.

• Valuation screening helps to identify relatively under-valued constituents in the ASEAN Investable Universe with rankings based on Dividend Yield and Forecast Price-to-Earnings.

Reviews are conducted on a semi-annual basis in May and October using data as at the last working day in April and September, respectively.

This article was originally published on SGX.