Equity Research
- Macro risk has moderated but outlook remains uncertain: emphasize idiosyncratic opportunities which offer better risk/reward parameters.
- Leaning into Korea: domestic positives outweigh global cyclical risks: raise to OW on 13%/16% 12m USD price/total return (KOSPI 3100 target)
- Toning up Taiwan: raise to MW following sharp ytd underperformance and more balanced risk/reward. 10% 12m USD price return (TAIEX 23,500 target)
- Moderating ASEAN: lower Singapore to MW following strong ytd outperformance, and Indonesia to UW on continuing earnings downgrades. Stay OW Philippines, MW Malaysia, UW Thailand.
- Regional refresh: moderate beta, ample alpha: expect 8%/11% 12m USD price/total returns on 675 MXAPJ index target. Remain OW China, Japan; UW Australia, Hong Kong. Raise tech hardware & semiconductors to MW. Favored themes include weaker dollar, shareholder yield, earnings quality, revision momentum, defense, and AI applications. We provide a screen of all GS Buy-rated names in Korea.
We see both upside and downside risks to the market's pricing of economic growth. A significant deterioration in economic data may challenge the ability of investors to look through near-term weakness. In contrast, there is room for further improvement in soft data, which would support continued upside for equities.
SECTION 899 PROPOSED TAX CHANGES IN FOCUS
US Daily: Section 899: A Potential Deterrent to Foreign Investment in the US
5 Jun 2025 | Research | Economics - Alec Phillips, William Marshall, Ben Snider, Michael Cahill and others
Strategy Espresso: UK stocks heading to the US: Section 899 & Wise re-listing
6 Jun 2025 | Research | Portfolio Strategy - Sharon Bell and others
9 Jun @ 2:30 PM LDN | REGISTER
With Alec Phillips, Guillaume Jaisson and Sahar Islam
Also read:
Europe Energy: EU Big Oils: Sensitivity to Section 899
Europe Banks: Assessing sensitivities from Section 899 proposed tax changes
Strategy Espresso: Section 899 and European Equities: Navigating Risks, Unlocking Flows
We highlight Nippon Paint Holdings as the next installation in our Japan Transformers series focusing on companies undergoing transformation. The company's core decorative paints business is largely unaffected by reciprocal tariffs and is a beneficiary of stabilizing petrochemical raw material prices. Its "asset assembler" business model also provides a key source of competitiveness. We expect Nippon Paint to deliver an EPS CAGR of +20% over FY12/24-27E, yet from a valuation standpoint, the shares trade at an FY12/26 P/E of 13X, well below the 10-year average of c.20X for global paint companies that specialize in decorative paints. With newly consolidated subsidiary AOC making a full contribution from 2Q12/25 (c.24% of our 2Q operating profit forecast) and profit momentum set to strengthen (yoy +41%, qoq +40%), we see now as an attractive entry point and upgrade Nippon Paint to Buy, from Neutral (34% upside).
Atsushi Ikeda
IN THE SPOTLIGHT
Henry Meyer
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