In the bustling heart of the Asian market, 2023 has presented a dynamic landscape. Investors have been eagerly keeping tabs on India, Japan, and the ever-evolving Chinese market, eagerly anticipating signs of growth and opportunity.
The tale of 2023 so far
- Japan’s Nikkei 225 has soared by an impressive 20% year-to-date, continuing an upward trend that saw it climb 46% last year.
- India’s Nifty 50 has also emerged as a market powerhouse, surging nearly 30% year-to-date.
- In contrast, China’s CSI 300 has faced headwinds, falling approximately 14.5% in the past year.
Unearthing “Alpha” Stocks: A Path to Beating the Market
For investors seeking to outpace the market in Asia-Pacific, Morgan Stanley has identified a captivating selection of “alpha” stocks. These stocks boast the potential to outshine the broader market and unlock significant returns.
To arrive at this selection, Morgan Stanley analysts meticulously scrutinized companies across Asia-Pacific, excluding Japan. They weighed factors like stock quality, value, and market sentiment, resulting in a curated list of stocks with market capitalizations exceeding billion.
Among the standout picks, South Korean commercial bank Hana Financial Group emerged as a prime candidate for outperformance.
Morgan Stanley’s analysts have upgraded the stock to an “overweight” rating and raised their 12-month target price to 71,000 Korean won (.2). This translates into an impressive upside potential of 28% from current levels.
“Our Korea Financial analyst, Joon Seok, is a strong believer in the transformational nature of South Korea’s Corporate Value-up Program,” the analysts explained. “He anticipates a remarkable turnaround in the company’s securities business, with further stock buybacks poised to enhance shareholder returns,”.
The Corporate Value-up Program is a visionary initiative spearheaded by South Korea’s Financial Services Commission. It aims to foster shareholder-centric practices within the corporate landscape through incentives like tax breaks, encouraging companies to prioritize valuation enhancement.
Another top stock endorsed by Morgan Stanley is Novatek Microelectronics, a prominent Taiwanese chipmaker.
Analysts predict that this tech giant will “outperform its peers due to the crescente adoption of foldable smartphones, market share gains, and cost reductions in wafer production. Emerging opportunities in AI ASIC (Application Specific Integrated Circuits) could also catalyze a significant re-rating,” they asserted.
April’s Overweight Overtures
Beyond these prominent picks, Morgan Stanley presented a comprehensive list of additional overweight-rated contenders for April:
- Hua Hong Semiconductor (China)
- Advanced Semiconductor Engineering (Taiwan)
- Hon Hai Precision Ind. (Taiwan)
- Largan Precision (Taiwan)
- Sun Art Retail Group (China)
- Mindtree (India)
- L&T Technology Services (India)
- Nestle Malaysia
- Cipla (India)
- Camtek (Taiwan)
Notable Bottom-ranked Bets
In addition to identifying potential market beaters, Morgan Stanley also underscored a few notable “bottom-ranked” stocks that may warrant caution:
- Santos, an Australian upstream oil and gas company, was included in this list due to the analysts’ perceived higher risk-reward potential in the downstream refining and retail sectors.
- Berger Paints, an Indian paint supplier, also raised caution flags due to growing industry competition. The analysts elaborated, “This increased competition may squeeze margins and erode the premium valuation commanded by paint companies compared to the general market and other consumer stocks.”
As the Asian markets continue to navigate the ebb and flow of global events, investors with a keen eye for opportunity will undoubtedly be watching these top- and bottom-ranked stocks very closely.
