Yuanta Asia Strategy Monthly — February 2019
25/02/2019 - 17:41
Yuanta Regional Monthly: February 25, 2019
Macro: Momentum for the US economy has slightly decelerated, while political and economic risks in the Eurozone are lingering. China’s attitude toward the US has softened. In Taiwan, Electronics and ICT order momentum decelerated; related names were also weak. The TAIEX continues its consolidation.
Taiwan: We suggest investors not be too optimistic on the TAIEX in March, as it has seen strong rebounds since January. With companies to disclose 4Q18 results by end-March, there may be great pressure if results miss expectations. As such, we suggest investors watch for pressure from results releases post recent strong rallies.
Hong Kong: Positive comments from leaders of both China and the US and the continuing constructive dialogues between the two governments on the trade dispute are obviously the key drivers of recent HSI advances. We believe there could be more upside to the HSI once a concrete trade agreement is reached between China and the US. Our 12 month HSI range forecast is still 26,000- 30,000. Key risk to our forecast is the breakdown of Sino-US trade negotiations, which are taking place now.
Shanghai: A new round of Sino-US trade talks will take place this week. A-share markets rallied after CNY, with the SH index gaining 2.45% in the first week post the holiday. We believe the rebound may continue driven by policy catalysts. The sixth round of high-level Sino-US trade talks took place in Beijing on Feb 14 and 15. The two countries have reached some agreement, and we expect the Chinese government to make fundamental changes to policy. The next round of talks will be held in Washington in the coming week. We expect nearby markets may see less negative factors in the next two weeks.
Korea: Expectations for an improvement in the Sino-US trade dispute have already been priced into the KOSPI. However, given the KOSPI’s rapid rise and downward earnings revisions, valuations look quite demanding. Thus, in the short term, the KOSPI’s growth momentum will likely weaken. The KOSPI should resume an uptrend when there is certainty that China’s macro indicators will not worsen further and when indicators regarding earnings estimates for Korean firms find a bottom.
Indonesia: For the last month, both the JCI and Rupiah have tended to be stable and entered a consolidation period, as the index inched up 0.67% MoM, while the currency has weakened by 0.8% MoM. Market turnover was slightly higher last month at IDR11.0 tn vs IDR9.9 tn during the previous month. Moreover, news and speculation over possible merger and acquisition (M&A) activities have sparked excitement in the market.
Thailand: The SET Index recovered most of the losses from December to close up by 2.72% for January. The SET’s uptrend followed global and other emerging market (EM) rallies in response to the US Fed’s dovish statements on interest rate policy. On the domestic front, political uncertainty heightened following announcement of the possible dissolution of the Thai Raksa Chart Party (TRCP) due to its nomination of Princess Ubolrat as its PM candidate.
Vietnam: The Year of the Pig got off to a rollicking start as Vietnam investors returned from the weeklong Lunar New Year break with a hunger to buy. The VN Index reached 971 as of Feb 20, up 6.9% from the pre-Lunar New Year holiday close and up 8.8% YTD. The Index has been led by strong share price performance from heavyweights VIC and VHM, which together account for more than 20% of market cap. The Index is already approaching our 990 yearend target for 2019 which we set prior to the policy U-turn of global central bankers. Although it now appears that the VN Index will exceed our target, the market could be in for some short-term consolidation at the 970-990 level. Foreign institutions have remained net buyers YTD, but are much less active than they were in Jan-Feb 2018.
Yuanta_Regional_Strategy_Monthly- February 2019