- Growth in Asian economies have been hampered in 2019 as headwinds dragged on exports. This arose due to a combination of China’s demand slowdown, semiconductor downcycle and trade war uncertainties.
- We believe a rebound in Asian exports is imminent due to 2 main factors: (i)
Cyclical upswing in global semiconductor
industry and (ii) Re-direction
of new orders into existing production capacity in other Asian economies after the one-off trade war shock.
-
We expect a robust uptrend in Asian exports as seen from our projections. The export-heavy markets such as Singapore, South Korea, Taiwan, Thailand and Malaysia will see a rebound in exports over the coming quarters leading to a recovery in economic growth. This will drive corporate earnings higher for Asian equities.
Valuations of Asia region (MSCI Asia ex Japan) remains cheap while supported by robust double-digit earnings growth. The upside potentials of Asia ex-Japan for FY2020 and 2021 remains very attractive at 12% and 27% respectively.
- Overall, we maintain our star ratings of 4.5 stars “Very Attractive” for Asia ex-Japan market.
What has happened to Asian exports?
Chart 1: GDP growth in Asian economies have been dragged down across 2019
Table 1: Quarterly GDP growth across Asian economies dipped in 2019, but slated to rebound next year.
Chart 2: Electronic exports account for a substantial portion of GDP in Asian economies
Why we think a rebound in regional trade is imminent?
Cyclical upswing in global semiconductor industry to drive trade activities
Chart 3: Semiconductor's downcycle contributed to Asian export decline
Potential Beneficiaries of the US-China trade conflict
How we think the rebound in Asian export numbers will look like into the next few quarters?
Chart 4: Malaysia’s quarterly export growth
Chart 5: Thailand’s quarterly export growth
Chart 6: Singapore’s quarterly export growth
Chart 7: South Korea’s quarterly export growth
Chart 8: Taiwan’s quarterly export growth
Risks/Potential Headwinds to Asian Export Recovery
Attractive Valuation and Earnings Growth
Table 2: Asia ex-Japan index offer decent upside potentials, thanks to its reasonable valuation and robust earnings growth.
| MSCI Asia ex-Japan Index | FY2018 | FY2019 | FY2020 | FY2021 |
| PE Ratio (X) | 13.5 | 14.7 | 12.9 | 11.4 |
| Expected Earnings Growth YoY | 2.6% | -8.4% | 13.9% | 13.5% |
| Earnings Per Share (EPS) | 47.3 | 43.3 | 49.4 | 56.0 |
| Projected Fair Price (based on Fair PE of 14.5X) | - | - | 716 | 812 |
| Potential Upside% from Today | - | - | 12% | 27% |
| Source: Bloomberg, iFAST estimates. Data as of Oct 2019. | ||||
Chart 9: Asia ex-Japan index current trades below our fair PE valuation
Chart 10: MSCI Asia ex-Japan index and its underlying earnings trend upwards across the longer term
The Research Team is part of iFAST Financial Pte Ltd.
All materials and contents found in this site are strictly for general circulation and informational purposes only and should not be considered as an offer, or solicitation, to deal in any of the funds or products found/identified in this site. While iFAST Financial Pte Ltd ("IFPL") has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies and typographical errors. Any opinion or estimate contained in this report is made on a general basis and neither IFPL nor any of its servants or agents have given any consideration to nor have they or any of them made any investigation of the investment objective, financial situation or particular need of any user or reader, any specific person or group of persons. You should consider carefully if the products you are going to purchase are suitable for your investment objective, investment experience, risk tolerance and other personal circumstances. If you are uncertain about the suitability of the investment product, please seek advice from a financial adviser, before making a decision to purchase the investment product. Past performance is not indicative of future performance. The value of the investment products and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. In respect of any matters arising from, or in connection with the said research analyses or research reports, recipients of the report are to contact IFPL at 10 Collyer Quay, #26-01 Ocean Financial Centre Building, Singapore 049315, or by telephone at +65 6557 2853. Where the report contains research analyses or research reports from a foreign research house and if the recipient of such research analyses or research reports is not an accredited investor, expert investor, institutional investor or an ex-accredited investor, IFPL accepts legal responsibility for the contents of such analyses or reports to such persons only to the extent as required by law. Please note that only certain security(ies) herein are available to all investors, while the rest are only available for certain persons to invest in, such as Accredited Investors (as defined in the Securities and Futures Act) or one who invests at least S$200,000 (or its equivalent currency) per transaction. To qualify as an Accredited Investor, one needs to submit a declaration form and certain relevant supporting documents, according to iFAST’s prevailing policies and procedures.
Please read our full disclaimers on the website at ( https://secure.fundsupermart.com/fsmone/policies/328125/investment-account-terms-&-conditions).
iFAST Financial Pte Ltd (IFPL) (registered address: 10 Collyer Quay #26-01 Ocean Financial Centre Singapore 049315, Telephone: 6557 2000) holds the Financial Advisers Licence issued by the Monetary Authority of Singapore ('MAS') to conduct regulated activities of advising on securities, marketing of collective investment schemes and arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance and the Capital Markets Services Licence issued by the MAS to conduct regulated activities of dealing in securities and providing custodial services for securities. While IFPL has made every effort to ensure the independence of the report's contents, IFPL's nature of business is such that IFPL and its connected and associated entities together with their respective directors, officers and staff may be involved in providing dealing or investment-related services in the abovementioned securities, and have taken or may take positions in the securities mentioned in this report, and may also act as the principal for any buy or sell trades.