New Delhi: Credit Suisse has upgraded India and Australia from Market Weight to Overweight while downgrading China and Thailand stock markets.
“The upgrades reflect our expectation that economic and earnings recoveries are just starting their most rapid phases for the two markets. EPS momentum for the two are among the region’s best, and the pandemic is no longer a major factor for either,” Credit Suisse said about India and Australia.
“We downgrade China from Overweight to Market Weight in an APAC portfolio because the most exciting period of its recovery has passed. China has limited potential for future GDP gains, negative EPS momentum relative to the region, late-cycle valuations and the region’s biggest potential payback from pandemic related current account windfalls. We also cut Thailand from Overweight to Market Weight for the opposite reason that the most exciting phase of its recovery lies too far in the future in 1H22,” Credit Suisse said.
Credit Suisse said India in a sweet spot looks much better positioned cyclically and relative to the pandemic.
“India suffered a severe outbreak but has seen a dramatic drop in infections, likely due at least in part to achievement of herd immunity in some locations. EPS momentum is among the region’s strongest. Its credit cycle is at an earlier stage than perhaps all other APAC markets. The scope for rate cuts is greater than in perhaps every other market save Indonesia,” it added.
Taken together, these revisions take funds from early Covid-recovery markets where economies are already back to trend GDP and from late-recovery markets that will continue to struggle with the pandemic until next year, and move the funds to second-phase recovery markets that can approach normalised output this year, it added.
Credit Suisse said China’s fast recovery last year leaves it with less growth headroom than other Asian markets. The economy is already at trend levels. EPS growth and revisions now lag the region’s. Valuations have achieved late-cycle premia. “Along with Taiwan, China will likely suffer the region’s biggest post-pandemic payback when normalisation of tourism outflows and PPE and tech exports subtracts over 2% of GDP from the current account, on our forecast,” it added.
IANS