ASEAN KEY DESTINATIONS
Goldman Sachs boosts Indonesia
"We believe that the investment case for this market is favorable," said the world's largest securities firm by revenue in its Asia-Pacific portfolio strategy in a report written by its analysts led by Timothy Moe.
Goldman said that despite expecting Indonesia to see a moderate interest rate increase later this year and in 2012, it was still forecasting economic growth to exceed 6 percent and the currency to slightly appreciate.
"This macro mix should be constructive for equities," the broker said.
The expected steady earnings growth of Indonesian listed companies is another appeal, Goldman said, adding that "the key driver for Indonesian equities will be earnings delivery, now that the market has re-rated and trades at fair value." The broker forecasts 18 percent and 15 percent earnings per share growth for 2011 and 2012, respectively.
Goldman also noted that the reforms initiated by the government for state-owned enterprises "may confer benefits both to the economy as a whole" and to the equity market directly.
"We are mindful of how important the process of SOE transformation and listing was for China's equity market, and note that if Indonesia is able to make the changes it envisions for this important part of the economy, it could have a positive impact on GDP growth and the transformation of its equity market," it said.
Out of Indonesia's 142 state firms, 18 are listed on the stock exchange and account for 27 percent of the benchmark index's market capitalization as of the first quarter. The three largest state-operated publicly traded companies are Bank Mandiri, Telekomunikasi Indonesia and Bank Rakyat Indonesia.
Against the backdrop of its equity outlook in developed market and Asian regions, Goldman said "investors should re-focus on the ASEAN markets," which tend to offer defensive domestic economic conditions that lead to "stable and visible earnings streams than, for example, global cyclicals."
Goldman also raised its recommendation on Malaysia to "overweight" from "market-weight" because the nation will benefit from rising crude oil prices. At the same time, the broker lowered Thailand to "underweight" from "market-weight," citing weak economic growth and political risks on next month's election.
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