Solid Asian telecoms safe havens in storm<\/p>\n
By Chris Johnson<\/p>\n
BANGKOK (Reuters): Well-established Asian telecoms companies
\nare some of the safest havens and potentially most lucrative
\ninvestments during the region's economic storm, industry analysts
\nsaid on Thursday.<\/p>\n
Sold down heavily as the financial crisis battered markets in
\nthe former \"Asian tigers\" earlier this year, many of the region's
\ntelecoms companies are now cheap but still have fundamentally
\nsound businesses and good cash-flow.<\/p>\n
Regional telecoms analysts pick a core of half a dozen firms
\nrunning telephone systems in Asia that they see as the most
\nlikely beneficiaries when the regional slump bottoms out.<\/p>\n
The list includes operators from China, India, Indonesia, the
\nPhilippines and Thailand and mostly concentrates on firms with
\nlow debt, high income and well established, profitable voice and
\ndata networks.<\/p>\n
Most of the names appear again and again on brokerage tip-
\nsheets and are recommended for immediate purchase.<\/p>\n
\"We would say 'Go for it now',\" said Jake Lynch, telecoms
\nanalyst for Southeast Asia at Jardine Fleming in Singapore.<\/p>\n
\"Maybe these markets don't turn around for six months or
\nwhatever, but when people start pumping money back in, they are
\ngoing to be going into the blue chips that they think are not
\ngoing to go bankrupt,\" he said.<\/p>\n
\"Telecoms as a sector should rebound because a lot of them
\nwere whipped around for reasons that had nothing to do with their
\nfundamentals and everything to do with their high liquidity and
\nthe fact you could proxy the market off them.\"<\/p>\n
Lynch argues that many Asian telecoms firms, representing as
\nmuch as a quarter or even a third of their local stock markets,
\nwere used as \"liquidity shoots\" for Western fund managers to
\nevacuate when panic gripped Asian markets this year.<\/p>\n
SG's Global Emerging Markets report this week agreed:<\/p>\n
\"They (telecoms firms) are sold first as investors scramble
\nfor exits and at current prices some have become oversold.\"<\/p>\n
Many funds have now left the region almost entirely and most
\nremaining investors in Asia are battened down for a long haul.<\/p>\n
\"The bull case is that the telco sector is the first to
\nrebound as most telcos have solid balance sheets and strong long-
\nterm fundamentals despite the current financial crunch,\" the SG
\nreport said.<\/p>\n
Economists and analysts disagree on how long the Asian crisis
\nis likely to take to unwind, with many seeing several years of
\nnegative or low growth before real recovery.<\/p>\n
But many feel the bottom of the trough has either almost been
\nreached or may be seen by the middle of 1999 and say some key
\nAsian blue chip shares may already be anticipating this.<\/p>\n
The key for investors is to pick stocks with solid finances
\nand cheap valuations, they say.<\/p>\n
Almost all telecoms analysts choose India's Mahanagar
\nTelephone Nigam Ltd, which they say offers high profit growth but
\nwas punished unfairly with the rest of the Indian market in the
\nwake of the country's nuclear tests in May.<\/p>\n
Indonesia's PT Telekomunikasi Indonesia is favored for similar
\nreasons as it is trading at distressed valuations after the
\ncountry's political crisis.<\/p>\n
Most analysts like Philippines Long Distance Telephone Co
\nbecause they say it offers fast growth and think it is likely to
\nbe bought soon by a large western investor, possibly by Spain's
\nTelefonica.<\/p>\n
Other favored telecoms stocks include China Telecom, SmarTone
\nand Thailand's Advanced Info Service because they all offer good
\ncash flows and have low or manageable debt.<\/p>\n
Francis Cheung, Asian regional telecoms analyst at Credit
\nSuisse First Boston in Hong Kong, says many Asian telecoms firms
\nmay perform best before economic recovery is well established.<\/p>\n
\"People will buy these telcos for defensive purposes and will
\ndo very well through the bottom of the cycle,\" he said.<\/p>\n
\"I think we are starting to see some economic stability in
\nAsia but I still don't think we have seen the bottom yet. These
\nstocks will do well as long as there is still economic turmoil.
\nThat could last another two years,\" said Cheung.<\/p>",
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