Published December 4, 2008

UOB among UBS' top picks in Asia

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(HONG KONG) Bharti Airtel, India's largest mobile-phone operator, and Hong Kong's Cathay Pacific Airways are among UBS AG's top 10 stock picks in Asia for 2009. The list, favouring telecom and financial companies, includes China Mobile and Singapore's United Overseas Bank. MSCI's Asia Pacific excluding Japan Index may surge 60 per cent next year, based on the region's previous two market recoveries, according to the report by Switzerland's largest bank dated yesterday.

'In Asia, we expect an equities rally to be led by better credit conditions, and thereafter by a bottoming in the global growth cycle,' analysts at UBS including Hong Kong-based Niall MacLeod wrote in the report. The MSCI Asia ex-Japan index has slumped 59 per cent this year as the collapse of the US mortgage market sparked financial turmoil that pushed the world's biggest economies into recession. Next year, the Swiss bank advised clients to focus on 'high-yielding stocks with good cash flow', given that a decline in lending rates is more likely than 'a sudden rebound in global growth'. UBS recommends investors buy more stocks in their portfolios than represented in the benchmark indexes for China, Hong Kong and Singapore, and fewer, or 'underweight,' for India, Malaysia and Taiwan.

Asian equities have slumped to 1.11 times book value, UBS said. In the last two recoveries in the region, stocks rebounded to an average price-to-book multiple of 1.6 within six to nine months of reaching the bottom. That multiple corresponds to 350 for the MSCI Asia ex-Japan index, UBS said, compared with 218.01 at 2:57 pm Hong Kong time. 'There is considerable upside to this target,' the report said.

Bharti Airtel and Cathay Pacific Airways are among the top picks partly because of their balance sheet strength. Bharti, which has plunged 32 per cent this year, is the best positioned mobile operator. While UBS recommends staying 'underweight' on technology and industrial stocks, Cathay Pacific is picked because lower oil prices 'should underpin' a recovery next year, coupled with its competitive position and 'attractive valuation' after sinking 62 per cent this year. -- Bloomberg