By Hanny Wan
Dec. 3 (Bloomberg) -- Bharti Airtel Ltd., India’s largest mobile-phone operator, and Hong Kong’s Cathay Pacific Airways Ltd. are among UBS AG’s top 10 stock picks in Asia for 2009.
The list, favoring telecom and financial companies, includes China Mobile Ltd. and Singapore’s United Overseas Bank Ltd.MSCI’s Asia Pacific excluding Japan Index may surge 60 percent next year, based on the region’s previous two market recoveries, according to the report by Switzerland’s largest bank dated today.
“In Asia, we expect an equities rally to be led by better credit conditions, and thereafter by a bottoming in the global growth cycle,” analysts at UBS including Hong Kong-based Niall MacLeod wrote in the report.
The MSCI Asia ex-Japan index has slumped 59 percent this year as the collapse of the U.S. mortgage market sparked financial turmoil that pushed the world’s biggest economies into recession. Next year, the Swiss bank advised clients to focus on “high-yielding stocks with good cash flow,” given that a decline in lending rates is more likely than “a sudden rebound in global growth.”
UBS recommends investors buy more stocks in their portfolios than represented in the benchmark indexes for China, Hong Kong and Singapore, and fewer, or “underweight,” for India, Malaysia and Taiwan.
Book Multiples
Asian equities have slumped to 1.11 times book value, UBS said. In the last two recoveries in the region, stocks rebounded to an average price-to-book multiple of 1.6 within six to nine months of reaching the bottom. That multiple corresponds to 350 for the MSCI Asia ex-Japan index, UBS said, compared with 218.01 at 2:57 p.m. Hong Kong time.
“There is considerable upside to this target,” the report said.
Bharti Airtel and Cathay Pacific Airways, Hong Kong’s largest airline, are among the top picks partly because of their balance sheet strength. In addition, Bharti Airtel, which has plunged 32 percent this year, is the best positioned mobile operator.
While UBS recommends staying “underweight” technology and industrial stocks, Cathay Pacific is picked because lower oil prices “should underpin” a recovery next year, coupled with its competitive position and “attractive valuation” after sinking 62 percent this year.
Cnooc, ICBC
Cnooc Ltd., China Resources Power Holdings Co., Industrial & Commercial Bank of China Ltd., and Sun Hung Kai Properties Ltd. are the other Hong Kong-listed shares among UBS’s top stock picks, according to the note.
China Mobile, the country’s biggest wireless carrier, has tumbled 48 percent this year. Cnooc, China’s biggest offshore oil producer, has fallen 55 percent. ICBC, China’s biggest bank, slumped 31 percent this year. Sun Hung Kai, Hong Kong’s second- largest developer by market value, has dropped 66 percent.
UBS also recommended Kasikornbank Pcl, Thailand’s fourth- biggest bank, which has slumped 54 percent, and KT&G Corp., South Korea’s No. 1 tobacco company, which has slipped 5.1 percent.
To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net
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