Implied return on equity for India to be 17.7%: Credit Suisse

Moneycontrol Bureau

While MSCI Asia Ex-Japan (MXASJ) has rallied by 9 percent year-to-date, the brokerage house has struggled with country allocation as the Expensive 4 have outperformed by 3.6 percent, Sakthi Siva of Credit Suisse says.

The Expensive 4 include India (55 percent premium), the Philippines (48 percent), Indonesia (45 percent) & Malaysia (22 percent).

The good news though is that at least since June 30, the Expensive 4 have underperformed MXASJ by 3.3 percent and all four have underperformed so far in the current quarter, she says.

For India, every time the premium rises to above 50 percent, it has tended to underperform & year-to-date, she says. MSCI India has underperformed by 5.8 percent.

She estimates implied return on equity for India to be 17.7 percent against the current 12.1 percent.

"While we are overweight the Cheapest 4 (in order Korea, MSCI China, Singapore and MSCI Hong Kong), our biggest overweights remain Korea and Taiwan," Siva says.