Taiwan, Indonesia Rating Raised at JPMorgan on Growth

By Berni Moestafa and Kyung Bok Cho

March 31 (Bloomberg) -- Taiwan and Indonesia’s stock markets were upgraded by JPMorgan Chase & Co. on their economic growth outlook, while Singapore was downgraded on concerns the city-state is no longer a “safe haven.”

Taiwan was raised to “overweight” from “neutral,” while Indonesia’s was rated “neutral” from “underweight,” JPMorgan said in a note yesterday. Singapore was cut to “underweight” from “neutral” on concern the banking industry may shrink.

“Powerful economic tailwinds of low interest rates, pro- growth fiscal policy, improving trade and selective competitive currencies are generating a recovery in Asian economies,” JPMorgan said.

Economies in Asia excluding Japan may recover next year with a 6 percent expansion, the Asian Development Bank said in a report today. The region is expected to expand at 3.4 percent this year, less than half of a September estimate of 7.2 percent, the Manila-based institution said.

Taiwan’s economic data, such as exports, have stabilized and are expected to improve from their lows, JPMorgan analysts Nick Lai, Raymond Hung and Adrian Mowat said in the report. Foreign investors have also started to become net buyers in Taiwan, they said.

‘Upside Surprises’

The brokerage recommends investors buy technology shares on the island that benefit from early signs of a recovery and reduce holdings in so-called defensive telecommunication stocks. Taiwan’s Taiex index has risen 15 percent so far this year, the world’s fifth-best performer.

“Expectations on earnings and economic outlook have been low, leaving an incremental improvement to upside surprises in 2009,” the report added.

Gains in commodity prices and the rupiah may also help Indonesian equities, analyst Aditya Srinath said in the report. Domestic investors have started buying shares, he said. “All of these are starting to build towards a constructive picture of Indonesian stocks,” he said.

PT Perusahaan Gas Negara and PT United Tractors are among JPMorgan’s top picks for Indonesia as these stocks are expected to benefit from gains in commodity prices. The brokerage cited PT Bank Rakyat Indonesia as its preferred stock among financial services companies, saying it stands to gain from an expected cut in interest rates.

In Singapore, the government’s fiscal spending and a recovery in global demand may “lead at best to a subdued growth prospects through 2009,” JPMorgan’s analyst Christopher Gee said in the note.

Investors should buy so-called liquid stocks that have regional operations, Gee said. DBS Group Holdings Ltd., Olam International Ltd., Keppel Corp. and City Developments Ltd. are his top picks.

For Related News and Information: Keppel’s financial analysis: KEP SP FA Stories on Indonesia’s stock market: TNI INDO STK BN Stories on Asia’s stock market: TNI ASIA STK BN