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Credit Suisse upgrades India, Australia to ‘overweight’; downgrades China and Thailand

KS Badri Narayanan Chennai | Updated on February 16, 2021 Published on February 16, 2021

The 'overweight' rating means country's fundamentals and/or valuation is favourable over the next 12 months

Credit Suisse, a Switzerland-based international wealth management company, has upgraded India and Australia to Overweight from Market Weight for its Asia Pacific (APAC) portfolio. It downgraded Chinese and Thailand markets to Market Weight from Overweight.

"India looks much better positioned cyclically and relative to the pandemic. India suffered a severe outbreak but has seen a dramatic drop in infections, likely due at least in part to achievement of herd immunity in some locations. EPS momentum is among the region's strongest. Its credit cycle is at an earlier stage than perhaps all other APAC markets. The scope for rate cuts is greater than in perhaps every other market save Indonesia," the global firm said.

The 'overweight' rating means country's fundamentals and/or valuation is favourable over the next 12 months while 'Market Weight' denotes neutral valuation over the next 12 months.

"We downgrade China from Overweight to Market Weight in an APAC portfolio because the most exciting period of its recovery has passed. China has limited potential for future GDP gains, negative EPS momentum relative to the region, late-cycle valuations and the region’s biggest potential payback from pandemic related current account windfalls," it said and added. "We also cut Thailand from Overweight to Market Weight for the opposite reason—that the most exciting phase of its recovery lies too far in the future in H1-22,"

The funds released to enable us to upgrade India and Australia from Market Weight to Overweight. The upgrades reflect our expectation that economic and earnings recoveries are just starting their most rapid phases for the two markets. EPS momentum for the two are among the region’s best, and the pandemic is no longer a significant factor for either, it justified for the rating upgrade

In 2019, Credit Suisse had downgraded India to Market Weight. "Global monetary easing will help India more than most Asian markets but the depth of the economic downturn is beginning to translate into EPS cuts just as consensus forecasts for previously hard-hit north Asian markets are stabilising," it had then said.

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Published on February 16, 2021
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