Buy China, India and Singapore Stocks in 2009, HSBC Recommends

By Chen Shiyin

Jan. 13 (Bloomberg) -- China, India and Singapore are Asia’s best bets for stocks this year as markets struggle to rebound from the rout in 2008, HSBC Holdings Plc said.

Asian equity markets will probably end the year within 10 percent of their current levels and a so-called bull market will likely only start in 2010, Garry Evans, HSBC’s Hong Kong-based strategist said. The brokerage last week raised India’s rating to “overweight” from “neutral,” saying valuations in the country and in China and Singapore are attractive.

The MSCI Asia-Pacific Index dropped 43 percent last year, the largest drop since the measure was created in 1987. Half of the region’s 12 MSCI country indexes posted their worst years on record as the deepening global recession weighed on earnings.

“Equity markets are going to be very volatile this year and you’re going to get upswings and then corrections,” Evans told reporters in Singapore today. “What I’m suggesting that you should do is buy large-cap, blue-chip stocks.”

India’s Sensitive Index is valued at 9.4 times reported earnings, down from as much as 31 times a year earlier, according to data tracked by Bloomberg. China’s CSI 300 Index is trading at 13 times earnings, almost a quarter of its valuation a year earlier, while Singapore’s Straits Times Index is at 6 times reported earnings, the lowest in Asia.

Investors should own shares of Infosys Technologies Ltd., India’s second-largest computer-services provider, and Reliance Industries Ltd., the country’s biggest non-state company, HSBC recommended in a report, first released to investors on Jan. 6.

India’s Long-Term Story

Corporate earnings in India will probably be unchanged in the current fiscal year and grow as much as 10 percent in the 12 months ending March 2010, the brokerage estimated. Investors will also likely shrug off concerns of further corporate fraud after Satyam Computer Systems Ltd.’s chairman disclosed last week he falsified accounts, Evans said.

“The long-term story for India is still in place,” the strategist said. “Satyam will probably prove to be a one-off. The vast majority of Indian companies are still better run than the average.”

Infosys said today third-quarter profit jumped 33 percent to a record after winning outsourcing orders from clients seeking to cut costs amid the global recession. The stock rose 5.5 percent to 1,224 rupees.

Taiwan Semiconductor Manufacturing Co., China Steel Corp., Li & Fung Ltd. and Cathay Pacific Airways Ltd. are among HSBC’s list of 10 recommended companies in Asia, the brokerage said.

ICBC, ZTE

In China, investors should own shares of Industrial and Commercial Bank of China Ltd., Shanghai Electric Group Co., China Petroleum and Chemical Corp., and ZTE Corp., the report said.

Earnings will probably decline 5 percent in China this year, compared with an average slump of about 15 percent in Asia, Evans said today. The economy will benefit from government stimulus plans, he added.

China is targeting growth of 8 percent in the world’s fourth-biggest economy. Premier Wen Jiabao pledged Jan. 11 to add to the nation’s 4 trillion yuan ($585 billion) stimulus package to create jobs and avoid social instability.

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.