BNP Paribas Raised Indonesia, Taiwan, India Stocks

May 7 (Bloomberg) -- Taiwan, India and Indonesia stocks were raised to “overweight” at BNP Paribas, which cited higher earnings estimates, increased fund inflows and improving demand for riskier assets.

The brokerage also raised its 12-month estimate for the MSCI AC Asia-Pacific excluding Japan Index to 440 from an earlier estimate of 320, according to a report by Clive McDonnell, BNP’s head of equity strategy in Asia. The forecast represents a 22 percent gain from yesterday’s close.

The MSCI regional index rose 0.4 percent to 361.86 as of 2:21 p.m. in Singapore today. It has jumped 26 percent this year on speculation that stimulus spending by governments from the U.S. to China will bolster global economic growth, after tumbling a record 54 percent in 2008.“Asian markets are benefiting from substantial capital inflows as investor risk appetite increases,” McDonnell wrote. “The next six months will be characterized by market expectations for increased earnings forecasts.”Taiwan and India were upgraded from “neutral,” while Indonesia’s rating was raised from “underweight.” The brokerage also has “overweight” recommendations for shares in South Korea, China and Hong Kong, the report said.

Taiwan, China
Taiwan’s Taiex index may rise to 7,800 as improving ties with China draw funds into the island’s stock market and as earnings estimates rise at the fastest pace in the region, McDonnell wrote. The index estimate is 19 percent higher than yesterday’s closing level and compares with BNP’s March estimate of 5,600.Taiwan and China are planning to permit trading of each others’ shares for the first time as ties improve 60 years after their civil war ended. A so-called trading platform may list as many as 30 stocks from each market, Schive Chi, chairman of the Taiwan Stock Exchange, said in a May 4 interview. Now, investors are restricted from directly investing in each others’ equities.The two economies agreed to double weekly flights and lift restrictions on investments in banks as relations that broke when the Communist Party took power in 1949 thaw. China Mobile Ltd. became the first state-owned company to invest directly in Taiwan on April 29, sending the Taiex index up 18 percent.In India, the benchmark Bombay Stock Exchange Sensitive Index may climb to 15,000, 25 percent higher than yesterday’s close, on optimism foreign capital will be able to service the country’s deficits and that earnings will decline less than earlier expected. The brokerage had raised its estimate for the Sensex to 12,300 last month.

Indonesia
The Indonesian benchmark Jakarta Composite Index may rally to 2,200, with so-called fair value earnings forecast to rise 28 percent this year, following a 2 percent decline in 2008, McDonnell wrote. The brokerage had a 12-month index target of 1,400, according to a March report. The Jakarta Composite has gained 35 percent this year, the third-best performer in Asia, while Taiwan’s Taiex has rallied 43 percent, the region’s largest gain. The Sensex has risen 25 percent this year.“The common thread across these three upgrades is increased liquidity flows and a better than expected outlook for earnings,” McDonnell wrote.