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Sector Star Ratings

Star Ratings For The Various Markets

Funds investing into these markets may not be available on our platform as yet but we hope that investors can review these star ratings to understand better our views on the various markets that our Research team covers.

For Overall Market Summary and Earnings Growth Forecast, click here.



Star Ratings Methodology

Star ratings are ratings we assign to various regional markets (Asia excluding Japan, US, Europe and Japan) and the Technology market to determine their level of attractiveness to an investor assuming a 3-year time frame. However, as our investors get more interested in a number of single country markets, we have carried out increasingly more research on these markets. Thus, we have come up with star ratings for a number of these single country markets to enable our investors to have a clearer research view and enable investors to make better comparisons between the various markets.

Our Methodology

We take the following four factors into account, and arrive at a score considering a certain weightage for each factor:

1) Valuations (45% weighting)

  • Comparison of earnings yield versus the government bond yield to find the excess earnings yield
  • Comparison of PE ratios on an absolute basis and in comparison to other markets
  • Other considerations (including corporate governance, political factors, market openness)
2) Earnings Growth (25% weighting)
  • Average growth over the next three years
3) Economic Potential (15% weighting)
  • Sustainable average economic growth over the next five to ten years
4) Currency Factor (15% weighting)
  • Whether, if invested, the currency will appreciate or depreciate against the Indian Rupee in the next 3 years

The star ratings are based on a continuous scoring system and imply the following:

1 star to < 2 stars - Not Attractive
2 stars to < 3 stars - Neutral
3 stars to < 4 stars - Attractive
4 stars to < 5 stars - Very Attractive

How To Use The Star Ratings In Portfolio Construction?

In general, we continue to advise that investors diversify and maintain exposure in all major markets to minimize the risk of having all their eggs in one basket. However, for the more aggressive investors who wish to take bigger positions in specific regions, we have now assigned stars to the various sectors and regions according to how attractive we feel these regions will be going forward on a three-year time horizon.

These ratings will be updated as and when we feel the relevant market ratings warrant a change. In the context of a portfolio, an attractive to very attractive rating (3 stars to < 5 stars) means that an investor can have more than their long term weighting in that sector. For example, for most investors, we suggest that a long term weighting of 30% of an investor's equity portion be put into Asia excluding Japan. Having a 4.0 star rating in this region means that we suggest that investors who can bear the risk, can consider having more than 30% since Asia excluding Japan is very attractive.

A neutral weighting (2 stars to < 3 stars) within a portfolio means that we see no reason to be overweight on the region, yet, the situation there is not so bad we that would wish to sell out of that region. Hence, the US market, according to our latest rating, warrants 3 stars, which means that if investors already hold up to 30% of their equity portion in US, then they do not really need to adjust their US weighting further.

And a 1 to < 2 stars rating, which means not attractive, will usually mean an investor may wish to consider reducing his investments in that region, or even outright selling off all his investments in that region.

As of 08 Sep 2011 and until further review, our ratings for the various equity markets are as follows:

Regional Star Ratings

Asia ex-Japan -  
Europe -  
GEMs -  
Japan -  
US -  

Single Asian Country/Market Star Ratings

China -  
Hong Kong -  
India -  
Indonesia -  
Malaysia -  
Singapore -  
South Korea -  
Taiwan -  
Technology -  
Thailand -