Christopher Wood of CLSA says monetary easing expectations are rising in India with growing speculation about who will replace Raghuram Rajan as the next RBI Governor in September.
For such reasons Greed & Fear would advise investors to increase exposure to Indian interest rate sensitive stocks most particularly in the housing finance and residential property sectors where the passage of a law in March bringing long overdue regulation to that sector has created the backdrop for a new property cycle, he says.
Accordingly, Greed & Fear will add to the weighting in the housing finance and property sectors in the long-only Asia ex-Japan portfolio.
Wood says investments in Indiabulls Housing Finance and DLF will be introduced with 3 percent each, while the existing investment in Prestige Estates will be increased by 1 percent.
Meanwhile, Sakthi Siva of Credit Suisse says, "With most investors rather sceptical of the rally in cyclicals, we thought it maybe pertinent to highlight defensives seeing EPS cuts."
In an environment where cyclicals are upgrading earnings, there has been earnings per share (EPS) cuts over the last three months ranging from 13 percent for Chularat Hospital to 17 percent each for Cipla and United Spirits to 23 percent for Reliance Communications to 24 percent for Indosat to 25 percent for Tingyi and 32 percent for China Unicom.
She believes the valuation gap, particularly when return on equity is taken into account continues to favour cyclicals over defensives.
Top cyclical picks from Credit Suisse regional portfolio are TSMC, Hon Hai, Samsung Electronics, Alibaba, POSCO, Angang, Hindalco, Rio Tinto, Hyundai Motors and Formosa Petrochemicals, says Siva.
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