When in fog, drive slowly. This sensible advice also applies to tough economic times and
is exactly what corporate Asia is doing – cutting investment plans and trying to get more
out of existing assets.
To assess how Asian companies will adjust to weaker economic growth, we have aggregated
the financial statements of nearly 400 industrials to analyse their growth prospects, their
cash flows, and the strength of their balance sheets.
While Asian sales growth is in line with nominal GDP growth, analysts continue to expect
margins to expand in 2012. Lower raw materials will help but weaker demand often
translates into weaker pricing power and margin pressure. Thus, margin assumptions
remain a risk.
Asian companies are also cutting back on capex. One implication of this is that cash/asset
ratios are likely to return to 2008 levels (18%). Another is that companies will try to “sweat”
existing assets and the resulting productivity gains should allow them to thrive when the
good times return.
When selecting countries and sectors, we use the same four themes that we developed in
Riding out the storm: Asian equities in 2012 (5 December 2011) – earnings resilience,
structural growth, access to cash and pricing anomalies. This results in the following country
and sector selection:
Country
 Overweight: Taiwan, China, Singapore
 Underweight: Korea, Thailand, Philippines
Sector
 Overweight: Technology (IT), Energy, Healthcare
 Underweight: Consumer staples, Utilities, Industrials
目录
Tough times, lean firms 6
Cautious and lean firms 6
Valuations 8
Fund flows and fund holdings 10
2012 Asia equity themes 12
A thematic approach 12
1. Self-help and earnings resilience 12
2. Franchise value and structural growth 14
3. Who’s got cash? 15
4. Pricing anomalies 16
Market and sector
recommendations 18
Seven factor scorecard 18
Country views 18
Sector views 19
Scorecard methodology 21
Power in transition 22
Elections 22
Countries 23
China (overweight) & Hong Kong (neutral) 24
Korea (underweight) 28
Taiwan (overweight) 30
India (neutral) 32
Singapore (overweight) 34
Malaysia (neutral) 36
Indonesia (neutral) 38
Thailand (underweight) 40
The Philippines (underweight) 42
Sectors 45
Financials (neutral) 46
Industrials (underweight) 50
Information Technology (overweight) 52
Consumer Discretionary (neutral) 54
Materials (neutral) 56
Telecom (neutral) 58
Consumer Staples (underweight) 60
Utilities (underweight) 62
Energy (overweight) 64
Healthcare (overweight) 66
Valuations and risks 68
Disclosure appendix 76
Disclaimer 79