Morgan Stanley has upgraded Indonesia to 'positive' from 'neutral', saying a combination of investment growth and positive business sentiment could drive upgrades to earnings outlook while a stronger global outlook was supportive to Indonesia's funding.
"Concerns are waning with regard to unfunded current account deficit due to a combination of improving global growth and loose global monetary policy," Morgan Stanley said in its ASEAN Equity Strategy dated Feb. 27.
It ranked Indonesia as its most preferred market within the ASEAN 3 market. It maintained its positive view on Thailand and negative view on Singapore.
"In our view, Indonesia still has the best structural growth story within ASEAN 3. Its structural story will continue to be driven by strong demographic-led domestic demand combined with infrastructure and capacity expansion-led investment cycle," it said.
MSCI Indonesia has underperformed MSCI Asia ex Japan by 817 basis points since January 2012 but it has begun to outperform MSCI Asia ex Japan by 852 basis points year to date, it said.
The broker said it had higher index targets of 12.9 percent, 9.4 percent and 3.8 percent for Indonesia, Thailand and Singapore respectively.
As of 0504 GMT, MSCI Indonesia was up 1.51 percent, MSCI Thailand was up 0.42 percent and MSCI Singapore was up 0.83 percent.
(Reporting by Viparat Jantraprap in Bangkok; Editing by G.Ram Mohan)