Credit Suisse Private Banking has upgraded Indonesian equities.
'We have changed our view on Indonesia to neutral from negative as the market has underperformed the emerging markets benchmark by 8.2% since the initiation of our call in August 2016,' investment strategists Koon How Heng, Jack Siu and Suresh Tantia said in a monthly investment newsletter.
'Post the sharp underperformance, market valuation has retraced back to a more reasonable level and we believe rising coal prices could support a gradual economic recovery.'
The Indonesia stock exchange has been edging higher since February, rising to 5,533.87 at the time of writing.
The strategists remain negative on Thailand and South Korea.
'We remain negative on Thailand and South Korea as the former could continue to underperform on expensive valuation and low earnings growth, while the latter appears vulnerable to trade and geopolitical risks.'
'Attractive entry opportunity'
The experts also remain upbeat on China following recent macroeconomic data -- with producer price inflation rising to 7.7% and manufacturing PMI at 51.6 reflecting that economic recovery is gaining momentum.
'While the government focus is shifting toward curtailment of potential risks in the financial sector, stabilizing growth indicates that earnings expansion should continue.
'With valuation still at attractive levels, the recent market consolidation offers an attractive entry opportunity for investors.
'We expect rising onshore investment from mainland mutual funds and insurance groups through stock connects to drive the next leg of the rally in H-shares,' they noted.
The cyclical recovery of Asian equities continues, they went on to say.
'A rebound in external trade and industrial activity are certainly driving earnings momentum with a healthy Q4 2016 corporate earnings season
'Moreover, for the first time in six years, the current year’s annual EPS expectations have been upgraded by 4.3% year-to-date, led by the technology, energy and materials sectors, which clearly indicates that markets could deliver double digit EPS growth in 2017.
'Nonetheless, in the near term, we believe that the Asian market could remain range-bound, given the high risk of trade protectionist measures,' they said.
Hence, they remain neutral on Asian equities, with selective preference for China.