Nomura in its equity Asia strategy note (excluding Japan) said it sees see near-term risks for Asian stocks from sticky US inflation, high oil prices and a stronger dollar.
But assuming geopolitical tensions eventually peter out, on a multi-month view, it remains modestly constructive on Asia (Ex-Japan) stocks. Nomura said it remains
'Overweight' on India due to strong structural outlook. India remains in the ‘Buy the dip’ camp, it said.
The brokerage has upgraded Singapore to a 'Neutral' and downgraded MSCI Hong Kong and Thailand to 'Underweight' from 'Neutral'. It maintain its 'Overweight' on India, Korea and China (tactical)
"We make three changes. We upgrade Singapore stocks to a Neutral from an Underweight (quality banks should offer buffer against elevated global bond yields; we view SGD as relatively defensive). However, we downgrade Thailand to U/W from Neutral (weak inflation/growth outlook ; continued delay in introduction of the digital wallet scheme and sustained earnings downgrades have come as a disappointment to us; valuations remain unexciting)," Nomura said.
For India, where its model portfolio weight is 22 per cent in Asia x-Japan, Nomura said as it likes a mix of stocks with reasonable relative valuations and domestic growth areas (banks, infra, consumption, healthcare) and is selecting stocks to hedge against currency risk. The list includes ICICI Bank Ltd, Axis Bank Ltd, Larsen & Toubro (L&T), Reliance Industries Ltd, Godrej Consumer Products (GCPL), Fortis Healthcare, Tech Mahindra.
Uno Minda and Mahindra & Mahindra are two stocks likely to benefit from some structural themes (e.g. increasing EV adoption).