Indian and Indonesian equities have been downgraded by Swiss bank Credit Suisse after the recent rally in these markets, while it upgraded Thailand’s equity market.
The Swiss bank cut its view on India from ‘outperform’ to ‘neutral’ and on Indonesia to ‘underperform’ from ‘neutral’.
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"After the strong post-election rally, we think the Indian equity market is likely to take a breather due to rich valuations, slowing earnings upgrade momentum, softer-than-expected industrial recovery and a significant supply of new shares in primary markets and private placements, Credit Suisse said in a note dated 1 October adding that the benchmark Sensex breached its 12-month target of 27,000 in September.
"The 30-share Sensex has risen 11.1% since its election results were announced on 16 May, and had closed 0.2% lower at 26,567.99 points on 1 October. Indian markets are closed for public holidays from 2-6 October.
"Priced at a 12-month forward P/E (price to earnings) of 16.4 times, above the 10-year historical average, the current valuation should have priced in the recovery outlook," Credit Suisse added.
According to the report, Taiwan, Korea and Indonesia are seeing the biggest outflows. Over September and October so far, there has been net foreign selling in Taiwan of $2.1bn, followed by Korea with $0.8bn and Indonesia with $0.7bn.
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