Tuesday, November 21, 2006

Better Late Than Never
But Why Are They Paid So Much For?

JPMorgan (JPM) has upgraded its recommendation on equities from Thailand, Malaysia and Indonesia, citing "pro-growth monetary policy" in all three countries. In a report released Monday on the 2007 outlook for emerging market equities, JPMorgan said it has raised Thailand equities to overweight and Malaysia and Indonesia to neutral. Other macroeconomic factors working in their favor include strengthening local currencies and increased domestic consumption as a result of lower gasoline prices, the report said. JPMorgan was more specific on its view on Thai equities, saying it "expects that both economic and profit forecasts will be revised higher over 2007." A more defined economic policy from the government during next year will also benefit Thai stocks.

As for the broad asset class of emerging market equities, JPMorgan predicts that conditions in 2007 will remain about the same as this year. Earnings growth will still surpass rates in developed markets. Headline growth rates in all regions remain robust, with domestic demand a key constituent of growth. The U.S. economy is expected to slow somewhat, but a moderation to 3% growth would augur well for emerging markets, as it is likely the Federal Reserve will stand pat on interest rates. Risk appetite in the context of moderating U.S. growth should put the spotlight on robust domestic demand stories, which abound in (emerging markets), the report said. In this scenario, international allocation to the asset class should rise.

One danger, JPMorgan pointed out, is that the market appears unprepared for the Fed to start raising rates again. The investment house expects the tightening cycle to resume in June 2007. If the shift in policy catches the market by surprise, emerging markets could sell off in the second quarter, JPMorgan warned.

According to the survey by Thomson Extel, what JP Morgan writes we should listen cause they were the top equity house in Indonesia and HK. But alas, just look at the report, it would have looked better if it was released in June 2006 or even January 2006, and not November 2006. To me, the strategy proclaimed is so stale and regurgitated already. Tell us something new, please ... buggers at JP Morgan Asia are way overpaid to write this diatribe. ... Gee, if I were them, I would prayed nobody finds out how "average my investment mind" is .... that I am really way overpaid and just ambling along, you know... smoke and mirrors to mask my inadequacies.., , and kinda got lucky to land this job...

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