HSBC turns positive on unloved Southeast Asian stocks

"We upgrade Indonesia and Thailand to overweight (and) remain overweight on Singapore," they said, calling out Singapore developer Capitaland and Indonesian conglomerate Astra International among the financial, telecom and consumer firms they also recommend in the region. The call comes as Southeast Asia's equity markets lag the global recovery amid persistent outflows from foreign investors and with many fund managers feeling it is too soon to return - something HSBC views as a positive.

Beaten-down equities in Southeast Asia have become irresistibly cheap, according to analysts at HSBC who recommend investing in Indonesia and across the region in a contrarian note on Monday that forecasted the best returns from laggard Singapore. On a day when social curbs returned to Jakarta, Europe's biggest bank said a combination of recovering growth, low interest rates and strong balance sheets made it the right time to buy stocks in some of the world's worst performing markets.

"At the beginning of pandemic, the visibility of these factors was foggy at best, but we think clarity has emerged now and these factors should be supportive for ASEAN equities," strategists Devendra Joshi and Herald van der Linde said in a note. "We upgrade Indonesia and Thailand to overweight (and) remain overweight on Singapore," they said, calling out Singapore developer Capitaland and Indonesian conglomerate Astra International among the financial, telecom and consumer firms they also recommend in the region.

The call comes as Southeast Asia's equity markets lag the global recovery amid persistent outflows from foreign investors and with many fund managers feeling it is too soon to return - something HSBC views as a positive. "As activity picks up and the global recovery continues, we think foreign institutional investor flows should come back and support the market," the analysts said.

Their base case is for a gain of 19% from Sept. 9 index levels in Singapore this year and for gains of 18% in Indonesia and Thailand, with "best case" gains of between 36% and 40%. They turned cautious on the Philippines where a lack of fiscal spending power could delay recovery and neutral on Malaysia since it has not performed as poorly as some neighbours.

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