Morningstar’s Asia Equity Market Outlook: Fourth-Quarter 2019 reveals top stock picks in Asia – Most opportunities are seen in Hong Kong market

4 Oct, 2019 12:37
source: 香港奇点财经 Singularity Financial

Banks, developers in Hong Kong and Singapore, and pharmaceutical distributors are amongst those in Morningstar’s list of top picks

HONG KONG, OCTOBER 3 , 2019 — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, published its Asia Equity Market Outlook: Fourth-Quarter 2019, which reveals analysts’ top picks in each of the 9 sectors.

Although the prolonged U.S.-China trade tensions have clouded the Asian markets, Morningstar analysts see long-term potential in the financial services and communications sector. Hong Kong developers offer attractive valuations amid excessive pessimism and overreaction to the ongoing protests. Healthcare industry in Asia, which is unaffected by trade conflicts, might face high volatility due to policy uncertainty, but pharmaceutical distributors are less likely to be impacted.

“We continue to view the threat of a global slowdown as the key risk to the region’s corporate earnings and share price performances, but companies with access to Chinese consumers will probably see stronger overall growth over the mid- to long-term,” said Lorraine Tan, Morningstar’s Director of Equity Research, Asia.

“At Morningstar, we focus on a company’s ability to generate cash flow and believe that long term value lies in returns that are above a company’s cost of capital. By looking at all companies through this lens, we’re able to cut out short-term market noise, look through cycles and find value in each company,” she added.

Highlights of key sectors:

• Communications: While a worst-case scenario where Huawei’s 5G equipment program is hampered by U.S. technology bans might cause some delays in 5G network rollouts and increased equipment costs for service providers; it would, however, be unlikely to alter the competitive dynamic between telecom services providers in the same market.
Top picks: China Mobile Ltd (00941.HK), KT Corp (KT.KS)

• Financials: We continue to see long-term value in banks, but the lack of near-term catalysts will see the banks continue to trade at discount to our fair value. A settlement of trade disputes between the U.S. and China would be a catalyst, but impact on regional economies would take some time to flow through.
Top picks: HSBC Holdings PLC (00005.HK), Sumitomo Mitsui Financial Group Inc (8316.JP), Oversea-Chinese Banking Corp Ltd (O39.SG), Agricultural Bank of China Ltd (01288.HK)

• Healthcare: The healthcare system in China is undergoing systematic reform and we continue to prefer drug distributors to drug manufacturers as we believe the former’s fundamentals are less affected by the reform.
Top picks: Takeda Pharmaceuticals (4502.JP), Shanghai Pharmaceuticals (02607.HK)

• Real Estate: Most names in our Hong Kong coverage are trading at attractive valuations, attributed to the market’s excessive pessimism and overreaction to the ongoing protests.
Top picks: Sun Hung Kai Properties (00016.HK), China Vanke (02202.HK), CapitaLand (C31.SG)

About Morningstar Asia Equity Research
Morningstar’s Asian Equity Research qualitative coverage currently focuses on companies domiciled and/or listed in Hong Kong, China, Japan, and Singapore. We also cover select companies listed in Taiwan and Korea. Our team of 19, made up of directors and analysts, is based in four locations in Asia: Hong Kong, Singapore, Shenzhen, and Tokyo. The team provides independent, fundamental equity research differentiated by a consistent focus on sustainable competitive advantages, or Economic Moats.

About Morningstar, Inc. and Morningstar Investment Management Asia Limited
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services
through its investment advisory subsidiaries, with more than $220 billion in assets under advisement and management as of June 30, 2019. The company has operations in 27 countries. For more information, visit Follow Morningstar on Twitter @MorningstarInc.

The investment research reports made available are provided by various Morningstar entities that are authorized and registered with the proper regulatory authority or are exempt from such registration. Morningstar Investment Management Asia Limited is authorized and regulated by the Hong Kong Securities and Futures Commission to provide investment research and non-discretionary investment advisory services to professional investors only.