My view is that this "young and financially savvy" section represents one potential sign that market valuations are getting a little high. Otherwise, why highlight undergrads' investing habits?

The Straits Times
www.straitstimes.com
Published on Mar 31, 2013
Young and financially savvy
Make money 'without actual work'
They're not yet out of school but already have impressive portfolios. Joyce Tan finds out what drives these young investors and susses out their different investing styles

Some people avoid checking the stock market every day to save themselves from minor heart attacks while others, like student Yeo Sui Chuan, monitor it closely.

"People check Facebook; I check the stock market. It's one of the things you do every day... It's enjoyable," says the first-year business administration student at the National University of Singapore.

Mr Yeo, 22, monitors the market two to three times a day but that's an improvement on his early days: When Mr Yeo made his first trade, he called up stock prices "obsessively".

"I checked it a few times in an hour and that lasted for a few weeks."

He had spent a year studying the market and learning about investing before finally taking the plunge in 2010 and buying four lots of ComfortDelGro.

It involved nearly $6,000 of his savings so he was eager to know whether he had made the right choice.

"I have friends who are into technical analysis so they have to pay close attention to the market. I don't fancy that kind of lifestyle... Mine is more 'chill'.

"If I don't have time, I don't check the market. During the school holidays, I can go for a few days without checking it. It doesn't bother me."

If Mr Yeo makes it sound easy, it is because he is not your typical college student.

He already boasts a portfolio of five stocks - one he has built up on his own, acquiring enough knowledge and interest to speak at length about his investing style in the process.

It is rather impressive for someone who started investing around two years ago.

Overhearing his father talk about the stock market with his friends and how much money he made piqued his curiosity.

"I found it quite amazing that you can make money by just buying and selling shares, and not doing actual work. I am interested in the idea of earning money this way," says Mr Yeo.

"So, I read up on investing and Warren Buffett in Wikipedia, and went to the books that he recommended."

It helped that he had worked part-time during school holidays and hates shopping. By 19, he had accumulated about $20,000 in his kitty, which came in handy when he entered the market.

Before making his first trade, he had made a sell call and found that he was right.

His father, a project manager, had helped him buy seven lots of Genting shares at about 70 cents a share when he was 15.

But it was Mr Yeo who decided to sell them in mid-2010 at about $2 after doing his own research.

When it came time to part with his own savings, he decided that he wanted to keep about 25 per cent of his money in cash, leaving him $15,000 to play with.

As he did not want to put all his eggs in one basket, he initially bought four lots of ComfortDelGro and then five of Mapletree Industrial Trust.

"I saw that Comfort's valuation was cheaper than SMRT's and was comforted by that," he says.

"Transport is very personal. I felt that I know it as I take public transport. It also tends to be more stable. Plus it is a blue chip."

Mr Yeo is still holding his ComfortDelGro shares as the fundamentals of the company are unchanged. "I follow Warren Buffett and do not look at the market."

As a member of the NUS investment society, he meets like-minded peers each week to discuss trading strategies and their purchases and to swop ideas.

Mr Yeo reviews his portfolio quarterly and reads books on investing, his favourite being Security Analysis.

When picking stocks, he looks for companies with large asset holdings and strong cash flow. He also watches out for their interest expense to see if they can continue paying their debts.

His best stock has been Elite KSB Holdings, which he sold for a profit of close to 50 per cent after holding it for a few months. He picked it after finding out that it was selling its core meat-processing business. He then checked its annual report and worked out a value that was substantially higher than its price then.

That did not call for a celebration, though. "To me, money is like a game. I don't have an emotional attachment to it. It's just a medium. It's like doing well in a test."

Still, he does have plans for it.

"Sometimes, I think about the money that I make, about what I am going to do with the money. Otherwise, it feels a bit pointless making the money."

"My dream is to own a good-class bungalow. I have a relative who lives in a bungalow with a pool, and I think it would be nice to have that kind of lifestyle," says Mr Yeo, who lives with his parents in a semi-detached house.

"If I achieve that, I would look at other things. I want to run a charity foundation and not just donate money.

"It helps to have different goals. If not, you will keep chasing money and never be happy."

joyceteo@sph.com.sg

----------------

The Straits Times
www.straitstimes.com
Published on Mar 31, 2013
Young and financially savvy
After tuition centre foray, investment banking is next
They're not yet out of school but already have impressive portfolios. Joyce Tan finds out what drives these young investors and susses out their different investing styles

Nanyang Technological University student Goh Chye Seng has already experienced the thrill of selling a profitable business and he is just 24.

Mr Goh, who set his sights on becoming a millionaire as far back as primary school, set up Amery Tuition Centre with his friend Gordon Li, right after serving national service.

They built up the client base and sold the company for a low five-figure sum around a year later after Mr Li left to study in Britain.

Sounds easy and in a sense it was - at least at first.

Mr Goh was reading an online story about parents being up in arms over how difficult the Primary School Leaving Examination maths questions were.

"I thought that would be a good opportunity to do a workshop for Primary 6 pupils," says Mr Goh, now in his second year studying accountancy, with a minor in entrepreneurship.

"We went to MRT stations to distribute fliers and got my partner's former tutor, who was a primary school teacher, to run the workshop. I was the salesman."

They offered an early bird special of $88 for one full-day session and signed up 100 pupils, with classes held at the four-room flat where Mr Goh and his family live.

Their success spurred the duo to open a tuition centre on the second floor of an HDB shophouse in Hougang.

They started with $5,000 - Mr Goh's share came from his tuition jobs - to rent and renovate the space, hire tutors and print brochures.

The initial months were tough - "I worked around 12 to 16 hours a day to get it running," says Mr Goh.

"My parents were telling me there was a high chance Amery was going to die.

"So we put in more effort, threw in more discounts, thought of creative ways to promote it, such as providing after-school homework care. We distributed fliers overnight for a period of time to ensure parents saw them first thing in the morning."

Fortunately, during the shaky initial days of the tuition centre, Mr Goh had another business that provided a small but steady stream of passive income.

He also runs Jellybean Party, which organises children's parties, with Mr Li, who was freelancing as a magician.

Their hard work eventually paid off. The tuition centre business broke even after three months and they made a profit of about $10,000 each, before it was sold for another sum in late 2010.

They even got the Singapore Indian Development Association to appoint them as a workshop provider. They provided 15 workshops and threw in free exam papers and phone support with just Mr Goh helming the line.

Mr Goh's next venture was share trading but a poor performing stock convinced Mr Goh that he would be better off investing in his own business rather than in equities.

He had ploughed his $10,000 into the initial public offer of Hutchison Port Holdings Trust without much thought, believing it would help increase his wealth.

"When the stock price plunged, my interest plunged," he says.

"I realised investing takes a lot of skill and you have to spend a lot of time analysing stocks. It's not so easy."

HPH Trust still trades below its IPO price of US$1.01 a share.

"I feel that when we are in a business, we have more control over it. There are alternatives to consider if things go wrong.

"But when you invest in stock and shares, you are putting money into other people's hands and there are external factors that are beyond your control."

For now, investment banking is where Mr Goh clearly wants to be. To gain exposure to the industry, he took a gap year to do two internships - at Citibank and boutique corporate finance firm Gereje, where he has secured an advance job offer.

He says: "I've wanted to be a millionaire since I was in primary school."

Mr Goh, whose father is a factory supervisor, was also inspired by his uncles, who run a trading business in Indonesia.

During his NS days, the platoon sergeant would read books on investing and business. "I am a frugal person and don't really spend unnecessarily, like on high-end dining and clubbing," he says.

"I believe I can become relatively rich if I manage my finances well. I've always been a saver and I believe in delayed gratification."

Not sure since when, the member list button at the top of the page also includes VB-33, which is a list of 33 counters listed in SGX.

Is the VB-33 the official portfolio of this forum? How are the 33 heros selected?

is there ever a need to opt for private integrated medishield plan from profit-driven insurers? it seems clear to me that the basic cpf medishield plan is adequate/improving for the better with premium increase, or that what our health minister is saying

SINGAPORE: Health Minister Gan Kim Yong said his ministry is "seriously considering" the idea of expanding the coverage of the MediShield - a national health insurance scheme - to go beyond just hospitalisation treatments.

Speaking at a post-budget dialogue session on Sunday, he said the ministry may also free up the use of Medisave - a national medical savings scheme - to include home-based hospice care.

Over 100 participants engaged the Health Minister in the two-hour wide-ranging dialogue.

Some wanted to know what more is being done to ramp up capacity in the healthcare sector.

But affordability was a key concern, with calls to expand the coverage of current financing schemes such as Medisave and MediShield.

Mr Gan said his ministry is aware that there are some outpatient treatments which can be costly and where insurance coverage under the MediShield may be useful.

So he's studying how the scheme can be expanded further.

The key is in striking a balance, so that premiums remain affordable.

Mr Gan said: "One area is say for example - chronic diseases. So whether we want to cover that, is something that we need to discuss, we need to explore and we need to also think through very carefully, because if we include too many items, the premiums will also go up for insurance. So we need to strike a balance between providing coverage as well as the cost of insurance."

The ministry will also study ways to help Singaporeans pay for the insurance premiums.

As for the use of Medisave, Mr Gan said extending it to cover home-based hospice care is one possibility.

But he said authorities need to be mindful about the many competing demands.

"There was request for extension to screenings, extension to hospice care and so on. These are all reasonable desires but at the end we still need to prioritise them, because after all Medisave balances are still limited, there's a finite pool and we want to make best use of the finite pool of savings that Singaporeans have," Mr Gan said.

The need to attract more locals into the healthcare sector was another concern and there were suggestions for salaries to be raised. Mr Gan assured that salaries will be kept competitive and that another round of review is likely to take place this year or next year.

As for capacity, Mr Gan said the ministry is also working with private hospitals to tap on their capacity to cater to subsidised patients.

- CNA/ck

I didn't know whether to laugh or cry when I read this. Brokerages are literally killing themselves by leveraging on the contra-trading rule, then later slamming trading curbs when things heat up. So they want the best of both worlds? People trading feverishly and providing them with commissions, yet not too fervently so as to ensure they don't go bust? Now how does that work, eh?

The Straits Times
www.straitstimes.com
Published on Mar 23, 2013
PLAY OF THE WEEK
Penny stock run wavers on trading curbs
Trading volumes plunge as brokerages place limits on small-cap share exposure

By Goh Eng Yeow Senior correspondent

DEBT-LADEN Cyprus might have grabbed the headlines this week, but the big news for many traders were the steps taken by brokerages to slam the brakes on penny stock trading.

UOB Kay Hian, for one, has put caps on a client's exposure to the small-cap sector.

An investor, allowed to trade up to $150,000 worth of shares, will be capped at $50,000 for each penny stock.

That rises to $100,000 for a single small-cap share if the investor has a higher overall trading limit.

For good measure, it even threw in a four-page memo on its website naming the affected stocks.

Not surprisingly, trading volumes have tumbled sharply as traders react to news of the brokerage trading curbs.

Just three weeks ago, overall daily market volumes soared to a record high of 12.2 billion shares. By Monday, the trading curbs had sent daily volumes tumbling to just 3.05 billion before improving to 5.5 billion shares yesterday.

You can't blame brokerage bosses for getting nervous and taking steps to protect themselves from any collateral fallout if the penny stock bull run screeches to a halt.

Penny stocks have been rallying hard, pushing the FTSE ST Catalist Index - which tracks 109 small-cap stocks on the junior board - up a startling 31 per cent since November.

What makes these shares so attractive is that they cost a few cents apiece, making them affordable to traders who like a quick bet.

But they mostly feature loss-making shell companies whose only attraction is to become takeover targets for ambitious businessmen planning to reverse their operations into them.

There is another reason to explain the sudden burst of interest in penny stock activity - the so-called contra trading system that exists only in Singapore and Malaysia.

Unlike other markets where an investor has to come up with cash upfront before he can buy any shares, a trader here has up to three days to pay for his stock purchase.

During this period, if the stock price goes up, he can sell the shares, offsetting his sale against his purchase, and collect a profit without ever having to come up with any cash to make payments.

Such an arrangement means that brokerages are indirectly financing the liquidity-driven penny stock rally.

So as stocks go up, they get correspondingly more worried about the potential losses that may ensue if there is a big market correction.

It does not help when some of these favourites subsequently dived in prices.

One example is Myanmar play WE Holdings, which plunged from 18.2 cents to 6.8 cents in just one week, purportedly on completion of a stock placement.

Then there was Rowsley, which had appeared unperturbed by the turmoil afflicting other penny stocks, until it suddenly plummeted by 17.5 per cent to 40 cents a week ago.

This was said to be due to the curbs slapped on it by a big brokerage during trading hours.

Some traders have complained about the arbitrary manner in which brokerages have imposed trading restrictions on penny stocks, arguing that such moves are material and should have been regulated by the Singapore Exchange.

But then again, there would have been no need to impose any curbs if there had been any fundamentals supporting their run-up in the first place.

engyeow@sph.com.sg

Quite a redundant question - obviously one must look at the QUALITY of the Company and its business model cum financials. Then again, one should wonder why the Company would want to issue rights in the first place? (Or maybe I forgot that the targets of this article are the traders, rather than the investors!)

The Straits Times
www.straitstimes.com
Published on Mar 23, 2013
Can you profit from a rights issue?
Tactic shows mixed record on recent issues; best to proceed with caution

By Jonathan Kwok

AS YET another rights issue heads to the market, you cannot really blame investors for scratching their heads and asking: What's in it for me?

These capital-raising moves are highly effective for companies seeking to boost their funds but they can leave many shareholders confused about whether to participate or not.

Investors of Rickmers Maritime now face that question.

The firm wants to raise $102 million from its one-for-one rights issue with each unit priced at 24 cents, a large discount to the business trust's last traded price.

Shareholders - and traders who contemplate buying into a company after it announces a rights issue so they can then participate - need to weigh their options.

In fact, shareholders have many options when a firm announces a rights issue, which essentially allows investors to subscribe for new shares at a discount to the market.

They can ignore the issue and let their rights expire, sell their rights on the market to let someone else subscribe for them, or take up the rights shares themselves.

There is also the issue of when exactly to buy and sell the stock.

They all add up to dozens of possible permutations that traders can take to try to spin a quick profit from a rights issue.

There are several details that traders need to study before trying a punt.

First, they need to know the ratio of the issue.

In Rickmers Maritime's case, the one-for-one issue means holders of one unit in the trust can subscribe for one new unit.

Other firms may offer two rights shares for every five shares held, or one rights share for every 10 held.

Investors will also need to know the cost of each rights share, or how much they need to pay to convert a right into a new share.

This is typically below the stock's prevailing market price.

They will also need to mark several dates on their calendars: the last day they can buy shares in the firm to still be offered rights; the trading period of the rights on the market (if they want to sell the rights); and the date when the rights will be converted to new shares so the new shares can be traded.

The Straits Times worked out how a hypothetical investor would have fared if he had participated in five recent rights issues: those by Moya Asia, Ramba Energy, Annica Holdings, KTL Global and Oxley Holdings.

One assumption was that the trader did not have any shares in the company to start with but bought in on the last day that he would be entitled to the rights. This is the day before the stock goes "ex-rights".

It was assumed that the investor would buy the minimum number of lots to give him a full lot of rights shares. So, in a two-for-five issue, he would buy five lots to get two lots of rights shares.

It was also assumed that the trader would not sell the rights and instead pay to convert all of them into new shares.

On the first day that the new rights shares are listed, the trader would sell all his holdings to fully liquidate his position.

Unfortunately the recent issues we looked at show that making a quick buck is not that easy.

This would have yielded a gain with Ramba Energy, which offered a two-for-five rights issue. Buying 5,000 shares at the last "cum-rights" price would have cost $2,950 at 59 cents apiece. The 2,000 rights shares would have cost 20 cents each, to take the total cost of the 7,000 shares to $3,350.

These shares would have fetched $4,060 on the first day the rights shares were listed, at the closing price of 58 cents - a profit of $710, or 21.2 per cent of the total cost of shares and rights shares.

But trying the tactic on KTL Global's two-for-five offer would have led to a 25.5 per cent loss.

The tactic would have been profitable on three of the recent issues studied, with losses incurred on the other two - hardly a sterling record.

A relatively efficient market, which adjusts for the price of the rights shares and the dilution due to the issuing of the new stock, makes it hard to make money from the arbitrage.

"The price will adjust" for the issue of the rights shares, said remisier Desmond Leong.

"Although you buy the rights shares at a lower price, the fact that it drops negates any gains."

But Mr Leong said he knows of "people who trade these rights shares also", in the hope that the larger shareholders will push up or support the rights shares.

Of course, there are other trading methods, such as selling the rights rather than converting them to shares, or buying directly into the rights.

These could well lead to different outcomes for traders.

jonkwok@sph.com.sg

Not sure if anyone sees the irony in these two articles (which I merged together in one thread). On one hand, while used car sales have completely dried up, Eurokars is opening its spanking new complex selling high-end cars to the ultra-rich. My point - Singapore is becoming more and more a playground for the rich. How will this bridge the income gap??

(By the way, if the 30-year old marketing executive cannot cough up the $20,000 for a DP on a car, he really shouldn't be buying a car in the first place!)

The Straits Times
www.straitstimes.com
Published on Mar 23, 2013
More gloom for used-car dealers
MAS rejects the industry's appeal to ease loan curbs on second-hand cars

By Jermyn Chow

THERE will be no respite for the used-car market, which has ground to a halt after the Government's drastic curbs on car loans.

The Monetary Authority of Singapore (MAS) told The Straits Times yesterday it has rejected an appeal from the industry, confirming that the curbs will continue to apply to both new and used cars.

But Singapore Vehicle Traders Association (SVTA) honorary secretary Raymond Tang is still praying for a change of heart.

He revealed that his association will be submitting a petition signed by its 400-plus members to Prime Minister Lee Hsien Loong today. "We are really bleeding, and hope the PM can do something quick to change the minds of the policy makers and soften the restrictions on us," he said.

Since Feb 26, buyers can only borrow up to 60 per cent of a car's purchase price, and have to pay it back in five years. Before, there was no cap on the loan, and buyers could take up to 10 years to pay the money back.

Explaining why it rejected SVTA's appeal, an MAS spokesman said exempting used cars from the curbs will push up prices of these vehicles, and drive demand towards new cars. This in turn will result in "higher COE (certificate of entitlement) prices, compromising the policy objective".

On the grouse of used car dealers' that they were not consulted, the spokesman said that "prior consultation is not possible for market-sensitive measures".

With COE premiums tumbling in the wake of the curbs, and dealers of new cars slashing prices, used-car businesses are suffering.

While showrooms of new cars remain packed, sales at second-hand shops have plunged by up to 100 per cent, despite some cutting prices by a third.

Mr Bret Chia, director of RPM Automobile, has not closed a deal since the restrictions, and is looking to sell his remaining fleet at a loss. "Better to get rid of the cars, even if I am losing $10,000."

There has been a small reprieve for businesses at Commonwealth Car Mall, whose owners have given them a 10 per cent discount on rental for the next three months.

Apex Trading managing director Thomas Lim, hoping for an easing of rental by Turf City landlord Cogent Holdings, said: "Now that the authorities are saying no to us, we are really hoping for our landlord to show some mercy."

MAS said it "understands the difficulties that used-car dealers are facing", and has introduced some concessions. These include exempting the physically disabled from loan restrictions for one car.

More used cars will likely also fall in the category where a 60 per cent loan is allowed with the MAS taking depreciation into account.

For cars whose open-market value is over $20,000, only loans of up to 50 per cent are allowed.

The MAS spokesman said: "We re-emphasise that the financing restrictions are not intended to be permanent, and will be adjusted as market conditions change."

Buyers hoping that loan rules for used cars will be relaxed will also have to rethink their plans to own a vehicle.

Said marketing executive Benjamin Chan, 30, who had to forgo a four-year-old Honda Jazz because he cannot afford the $20,000 downpayment: "Looks like I have to wait a little longer."

jermync@sph.com.sg

---------------------

The Straits Times
www.straitstimes.com
Published on Mar 23, 2013
$42m luxury car showroom opens

By Royston Sim

A LUXURIOUS car showroom for premium marques such as Rolls-Royce and Porsche opened yesterday - boasting features such as two giant vehicle lifts and a swanky bar.

Costing $42 million and built over two years, the Eurokars City Centre hopes to take advantage of the bullish premium motor market, despite recent curbs on loans to motorists and a tiered additional registration fee.

The six-storey, 76,000 sq ft Eurokars facility houses three brands - Porsche, Rolls-Royce and Mini - and was built on an existing Porsche showroom site on Leng Kee Road. Eurokars group executive chairman Karsono Kwee promised the revamped facility will provide luxury-car enthusiasts with a more comfortable experience.

"No expense was spared in creating a luxurious environment for our customers. We want them to feel like they are at home," he said.

Eurokars said the new facility houses the biggest Rolls-Royce showroom in South-east Asia, with over 4,600 sq ft of floor space.

Two enormous car lifts - which the group says are the biggest in Singapore - ensure that even the longest 6m Phantoms can be transported to the second-floor showroom with ease. There is also a customer lounge with a "floating bar" taking up more than 3,700 sq ft.

Last year, the group sold 408 Porsches, compared with 473 in 2011 and 324 in 2010.

Rolls-Royce deliveries hit a record high of 29 last year, from 26 in 2011 and 27 in 2010.

The outlook for Singapore's luxury car market is bullish even with recent changes, Mr Kwee said, noting that the market share for premium cars has increased over the years.

As for certificates of entitlement, he said it was hard to predict where premiums were headed, as the market is still turbulent and has not settled down.

roysim@sph.com.sg

The Straits Times
www.straitstimes.com
Published on Mar 22, 2013
Stalled F1 listing set to roar back

By Magdalen Ng

THE stalled Formula One initial public offering (IPO) in Singapore is revving back to life, as market conditions improve.

Sources familiar with the proposal told The Straits Times that a listing could be possible as early as the second half of the year.

Private equity firm CVC Capital Partners initiated the listing process last year.

But it was put on hold amid turmoil in the equity markets, as the euro zone debt crisis unnerved investors.

The IPO was set to raise as much as US$3 billion (S$3.7 billion).

When contacted, CVC spokesman James Olley said that the firm had no comment.

Another banker with knowledge of the situation added that the documentation needed by the Singapore Exchange for the listing is up to date, but the company is in no hurry to decide.

"The company is in a good financial position; they have some leeway to wait for market conditions to improve," he said. "Listing by the end of the year is definitely possible," he added.

F1's listing in Singapore would tap its growing popularity in Asia, especially as the iconic night race here has been extended to 2017.

CIMB regional economist Song Seng Wun noted that while F1 and boss Bernie Ecclestone have been clear about their intentions to raise money from the market, such listings are functions of fickle market movements.

"It's all about timing. Right up to this week, before Cyprus happened, conditions seemed to be extremely conducive for equities," he said.

Mr Song added that the continued sounding out of the market by issue managers is to be expected, as that will affect "how much they can afford to price the listing".

There is continued uncertainty over a bailout for Cyprus, after lawmakers rejected a plan to tax bank deposits over €20,000 (S$32,200) but the Straits Times Index gained 19.25 points yesterday, or 0.59 per cent, almost recovering the loss from Wednesday. Mr Ecclestone did not respond to requests for comments.

songyuan@sph.com.sg

KUALA LUMPUR - Getaways to China are selling like hot cakes at the "The Malaysian Association of Tour and Travel Agents (MATTA) Fair March 2013".

MATTA Fair March 2013 organising chairman Jeffri Sulaiman said, based on their Buyers' Contest survey, many visitors had purchased travel packages to China (50), Thailand (34), United Kingdom (22) and Japan (17).

"As for domestic destinations, many visitors bought travel packages to Kuala Lumpur and Selangor."

However, he said that the participation of the survey was voluntary and believed that the figures were much higher.

MATTA president Datuk Mohd Khalid Harun said, in terms of country, Malaysia topped the choice of destination when purchasing the packages.

"Some 103 packages have been bought to travel within Malaysia, which shows domestic tourism is still strong," he said.

KSK Travels Sdn Bhd tour division manager Ken Lai said that they had sold more than 50 tour packages to China, especially to YangTze River, Korean and other Asian countries since Friday.

He said most Malaysians chose to go there during the Spring season between March to May.

"There were also customers who would go for winter packages as they love the cold weather and can escape the country's hot climate."

Japan National Tourism Organisation Singapore Office executive director Motonari Adachi said the most sought-after destinations in Japan were Hokkaido, Gifu, Tokyo and Osaka.

"Malaysians also love to experience the lavender bloom season between June and July and cherry blossoms between April and May," he said.

Another bullish commentary on prospects for performance of Asian stocks. The claim is driven by claimed/perceived continued earnings growth. HSBC seem particularly positive on China and Korea ……..

QUOTE
Asian Stocks to Jump Up to 20% on Earnings Growth: HSBC
Published: Friday, 15 Mar 2013 | 7:16 AM ET
By: Rajeshni Naidu-Ghelani, Assistant Producer, CNBC

Asian equities have lagged the global stock market rally since the start of the year, but according to HSBC, Asian stocks could still deliver a 20 % upside by the end of 2013.

Devendra Joshi, equity strategist for Asia Pacific at HSBC said that based on the current consensus estimates of 13 % earnings growth for Asian stocks this year, markets could rise 15 to 20 %. "We think with all the loose monetary policy and let's say around 4 to 5 % rerating in the market of the PEs (price- earnings ratios), add to that around 3 to 3.5 % average dividend yields for Asia ex-Japan and it gives you around 20 %" Joshi said.

HSBC's call comes even as the MSCI Asia Pacific ex-Japan Index has risen only 2.2 % so far this year. That compares to gains of 12 % for U.S. equities, while global stocks measured by the MSCI World Index are higher by almost 8 %. Joshi, however, is convinced that Asian equities will pick up steam when earnings are revised up after Purchasing Managers Indexes (PMI) tick upwards to the 53-54 level in the second quarter of the year from the current 50-51 mark. "We think basically PMIs will rise and we see more earnings upgrades coming as well," Joshi said. "There will be more conviction for analysts that growth is coming back to the region."

HSBC is overweight on the "value markets" of China and South Korea, because they are the cheapest across the region. "One of themes we have this year is value versus growth, so China fits perfectly into that value category. It's the cheapest in the region and cheap to its own history as well," Joshi said. "Korea usually has been the cheapest market in the region, but right now it's even cheaper compared to its own history." The MSCI China Index is trading at 8.5 times its 12-month forward earnings, compared to a long term average of nearly 13 times, which is about 35 % cheaper, according to Joshi. Whereas, the MSCI Korea Index is trading at a ratio of 8.5 compared to a long term average of 10.5, which is more than 20 % cheaper.

Another reason why Joshi is bullish on these markets is because HSBC believes the China growth story will remain intact in 2013. "We think that growth will be pretty ok in China overall - there won't be any major disappointments," Joshi said. "We think with China improving and Korea being the major exporter to China, Korea will benefit as well on the back of that."
UNQUOTE