Promising Returns In ASEAN

Lim Si Jie

If there is any region that is going to deliver good return in 2018, DBS foresees that it will be Asia. According to DBS, all Asia markets are forecasted to post positive returns in 2018, driven by a synchronised global recovery. As such, DBS believes that there are abundant outperforming opportunities in ASEAN, both from a top-down and bottom-up perspective.

Here are four conviction investment themes that DBS recommends for delivering good returns in ASEAN.

Investors Takeaway: 4 Conviction Investment Themes To Deliver Good Returns In ASEAN

  1. Synchronised Recovery To Drive Export Growth

export growth

DBS highlights the demand pull from US, Europe, and Japan as a driving factor for Asia in 2018. The world hasn’t seen such a pull from US, Europe, and Japan for a long time, but a synchronised pick-up in activity has led to considerable recovery in demand.

Since Asia sits at the centre of the global electronics manufacturing supply chain, DBS pointed out that Asia will benefit greatly from this demand buoyancy. Malaysia, Singapore, and Thailand are all experiencing robust export growth. DBS recommends electronics stocks in these countries which can differentiate themselves as key players in their respective fields.

Recommend Stocks: Venture Corp, Hi-P, SKP Resources

  1. Oil – Commodity Demand To Remain Strong

As global growth continues, the prospect for commodity prices to remain stable (if not stronger) is still very strong. DBS notes that the market is slowly turning more positive on the oil and gas sector. Some research houses, including DBS, are raising oil price forecast. Other important commodities like coal, should also expect higher price forecast following the strong coal price recorded in 2017.

Recommend Stocks: Sembcorp Marine, Serba Dinamik Holdings, Wah Seong Corporation

  1. ASEAN Consumption Story

shopping

2018 will continue to be the year where ASEAN remains as an attractive demographic story. Consumer and investment spending are key growth drivers. Together with reforms and politics, it presents many interesting opportunities for ASEAN consumer stocks in 2018.

Based on DBS’ forecast, consumer companies could accelerate earnings growth to 13.6 percent. This is largely due to expectations of further improvement in consumer sentiment, government stimulus and margin improvements. Among consumer stocks, DBS prefers stocks that leverage on domestic demand.

Recommend Stocks: Thaibev, BreadTalk Group, Jollibee Foods Corporation, CP ALL Public Company, Indofood CBP Sukses

  1. Growing Tourism To ASEAN

asean

With a stronger global economic outlook, 2018’s travel and tourism growth can accelerate as demand from key regions such as China, India and Intra-ASEAN continue to grow at a robust pace. In 2018, DBS foresees 5-6 percent growth in number of international visitors into ASEAN. This growth is mainly led by growth in key markets such as Thailand, Malaysia and Singapore.

ASEAN air travel demand will remain robust on the macro tourism growth backdrop, despite supply ramping up in 2H17. DBS prefers low cost carriers, given their cost advantage and market position. In terms of hospitality picks, DBS prefers proxies in Singapore such as CDL Hospitality Trust and Frasers Hospitality Trust.

Recommend Stocks: CDL Hospitality Trust, Frasers Hospitality Trust, Genting Singapore, Air Asia, Yong Tai, Cebu Pacific, Garuda Indonesia, Airports of Thailand PCL, The Erawan Group