[July 18, 2011] China, HK shares 'offer better upside' Tweet SINGAPORE, Jul 18, 2011 (The Straits Times - McClatchy-Tribune Information Services via COMTEX) -- Rather than focus on Singapore equities, investors should look to the region, especially mainland China, Hong Kong and Indonesia, said Credit Suisse economists. This is despite the expected earnings per share growth forecast for Singapore shares, which is 10 per cent for this year to next year, a rise from last year's 4 per cent. Ms Fan Cheuk Wan, head of research Asia-Pacific of the private banking division, said that while it is a good earnings forecast, Singapore does not compare favourably with other Asian markets. She added that mainland China and Hong Kong indices offered the most attractive upside potential of 23 per cent. At the same time, she also suggests an 'underweight' rating on China A shares -- those traded in the Chinese yuan. "This is due to a likely launching of the international board in Shanghai, which will mean a supply overhang that will cap the upside potential of the shares," she said. An international board means that foreign companies will be allowed to list yuan-denominated shares on the Shanghai Stock Exchange. But investors should take note of the potential foreign exchange losses in investing in Hong Kong equities. Ms Fan explains that since the Hong Kong dollar is pegged to the US dollar, based on forecast, there is a potential forex loss of 3.7 per cent. But the projected capital gains are expected to more than cover the foreign exchange risk. Mr Joseph Tan, Asian chief economist of the Credit Suisse private banking division, also believes that the factors which led to an underperformance of Asian equities in the first half of the year are likely to fade in the second half. The factors include rising inflation, monetary tightening, oil price shocks caused by political events in the Middle East and North Africa, and the global growth deceleration. A re-acceleration in global growth and peaking inflation will offer key catalysts for a re-rating of the Asian equity market, he added. To see more of the Asia News Network, go to http://www.asianewsnet.net/home/ Copyright (c) 2011, The Straits Times, Singapore / Asia News Network Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com. [ Back To TMCnet.com's Homepage ]