UBS ups Indonesian equity ratings

UBS ups Indonesian equity ratings

KUALA LUMPUR (Reuter): European firm UBS Global Research said it has upgraded its equity market ratings for Malaysia and Indonesia.

"Malaysia is now on an overweight (previously neutral) and Indonesia on a neutral (previously underweight) recommendation in the UBS global emerging markets portfolio," UBS said in a research paper issued from London.

"Our risk premium model suggests that the two markets are at fair value on our worst case scenario -- earnings growth for the next two years negative in dollar terms," it said.

This compared with its recent forecast of 10-20 percent earnings growth in dollar terms for the two countries.

"Although there is downside risk in both markets and currencies in the short-term, we recommend that investors use further weakness as an opportunity to buy," the paper said.

It said that among countries in the Association of South East Asian Nations (ASEAN), Malaysia and Indonesia offered relatively the best economic fundamentals.

"Currency depreciation and asset price deflation hurts the exchequer, financial system and corporate earnings, but we believe that is already being discounted by the equity markets," UBS said.

Malaysia's key stock market index is down 40 percent this year, while the Jakarta Stock Exchange's has lost around 25 percent.

Both markets are victims of a currency selldown as the contagion from a Thai economic crisis spread.

Recently announced measures to correct imbalances in the economy, caused by protracted periods of fast-paced growth, have eased the selling pressure on the two markets.

The Jakarta stock market has recovered by 24 percent in the last three days, while the Kuala Lumpur Stock Exchange Composite Index was up 12.37 percent on Friday.