Asia-ex Japan Stocks May Surge 31%, BNP Paribas Says

(Bloomberg) -- The MSCI Asia excluding Japan Index may rise 31 percent over 12 months, led by Taiwan, on declining risks and cost of equity, a buildup in liquidity and a return to “peak profitability” in some markets, BNP Paribas said. The regional index may rise to 550 next August, BNP strategists Clive McDonnell and Anando Maitra wrote in a report released today. Taiwan’s Taiex index may rise to 9,700, posting the highest returns among the region’s benchmark gauges, the analysts added.“Taiwan stands out as our top pick over the coming 12 months based on the potential upside for the market as well as the exposure it offers to the information technology sector,” the strategists wrote.

The MSCI Asia excluding Japan Index gained 0.3 percent to 418.54 yesterday, having retreated 4.9 percent from its year’s high on Aug. 3. The measure remains 45 percent higher this year, with Asian stock markets accounting for six of the world’s 10 best performers.A gain to 550 would boost the MSCI Asia index’s price-to- book value ratio to 2.1 times from the current 1.7 multiple, the BNP strategists said. The measure rose 0.5 percent to 420.70 as of 12:31 p.m. in Singapore.Though above the long-term average, we believe this multiple is sustainable given the faster-than-expected earnings recovery, the buildup in liquidity and forecast sustained increase in foreign inflows to Asian markets,” the report said.

Taiwan’s Prospects
The brokerage’s forecast for Taiwan’s Taiex also represents a 43 percent gain from yesterday’s close. The benchmark index has already climbed 48 percent this year, in part because of speculation that easing ties with China will boost trade and investment with the larger mainland economy.In Taiwan, investors should buy shares of Mediatek Inc., Advanced Semiconductor Engineering Inc., Hon Hai Precision Industry Co., Wistron Corp. and Taiwan Cement Corp., the strategists said.Taiwan is among markets favored by JPMorgan Chase & Co. because of the prospects of a global economic recovery, Adrian Mowat, the brokerage’s chief Asian and emerging-market strategist said in a Bloomberg Television interview today.

“I’d use this weakness in markets to be buying Korea, Taiwan, India and Indonesia,” Mowat said. “Our expectation is that the global economy is recovering. We think we’re going to make more money by being long tech companies in Korea and Taiwan.”