Dragged down by big Chinese stocks, the valuation of Asian equities dropped to a 17-month low in October, while markets in the US and other major western economies soared.
So, is there value to be found within markets across the Asia region?
Southeast Asia is one area investment giant Fidelity is becoming increasing optimistic on as nations continue to recover from COVID-19.
“The Covid-19 recession in ASEAN is probably most similar to the Asian financial crisis versus the global financial crisis (GFC) or the tech recession in 2001. Essentially what we have seen in this recession is that manufacturing held up really well mainly as external demand remained robust with the huge fiscal stimulus in developed markets translating into strong demand for goods,” Fidelity said in a note.
“The region is expected to reach 70% vaccinations by end 2021 – mid 2022, but there are reasons to be optimistic. For instance, just this month Thailand which had talked about reopening to 10 countries, opened up to 76.
“This is a rapidly shifting picture, but we are moving in the right direction.
“In terms of opportunities, we favour businesses that are strong franchises with sustainable competitive advantages, offer a good runway of future growth, attractive valuations and superior management ability.”
Fidelity named the following three Southeast Asian stocks it believes fits that bill.
Sea Limited (NYSE: SE)
Sea Limited is a Singapore-based ecommerce giant with a market-leading position across much of Southeast Asia, while it is also in the process of rolling out its successful ecommerce and payments platforms into India, the Middle East, LATAM, and Europe.
“SEA Ltd is a beneficiary of the shift to online lifestyles. Structural trends such as an expansion in the mobile gaming segment as well as rising e-commerce and fintech penetration in the South East Asia region are also supportive,” says Fidelity.
Sea Limited is also a stock favoured by renowned growth investor Cathie Wood.
CIMB Group Holdings (KLSE: CIMB)
Malaysia’s CIMB Group Holdings is one of the largest financial services companies in Southeast Asia with more than 1000 branches across the region. It has business units focussing on a range of banking services, including retail banking, commercial banking, investment banking and Islamic finance.
Fidelity believes CIMB’s current market cap of around US$51 billion makes it an attractive value opportunity.
“We see opportunities in mis-priced names such Malaysia-based CIMB Group Holdings which offers attractive profitability turnaround potential following an internal management restructuring.”
TISCO Financial Group (BKK: TISCO)
Listed on the Stock Exchange of Thailand, TISCO Financial Group is another Southeast Asian financial services company that Fidelity believes is an attractive investment opportunity right now.
TISCO operates in funds management, private banking, brokerage and investment banking. Its flagship brand, TISCO Bank, offers retail, SME and corporate banking through more than 50 bank branches and 300 micro finance offices across Thailand.
“TISCO Financial Group has a resilient balance sheet and strong underwriting discipline. The company is a play on the potential recovery in automobile demand from depressed levels,” says Fidelity.