Tata Motors, RIL, YES Bank among UBS' top Asian picks

In terms of countries, UBS remains overweight on Japan where they see the best earnings story, Korea and Taiwan for cyclical reasons

Six India-listed stocks are among the top 40 scrip investment recommendations of UBS, the global research and investment advisor. These are Tata Motors, Reliance Industries (RIL), YES Bank, LIC Housing Finance, JSW Steel and Bharti Airtel.

In a recent Asia-Pacific equity strategy report, authored by Niall MacLeod, Matthew Gilman and Yuka Murata, UBS identified these 40 as investment–worthy, saying the choice was after combining “four key approaches to stock selection, which uses both top-down and bottom-up factors”.

UBS sees four key themes – rising bond yields/the risk of fears of a US Federal Reserve rate rise into 2015; the global cycle and export pick-up; China's economic slowdown and, reforms. “The first three will be a headwind for the region but particularly Asean (Southeast Asia). The global economic recovery should help north Asia over south. A China slowdown leads us to be negative on commodity-exposed countries/sectors. Last, we are favourable on reform-related stock plays in Japan, China and India,” the report adds.

Some of the other stocks that made it to the list were Toyota Motor, Dai-ichi Life Insurance, Yahoo Japan, Sinopec, China Railway Group and Hyundai Motor. UBS remains overweight on Japan, where they see the best earnings story, beside Korea and Taiwan for cyclical reasons. They retain a neutral rating on India. “We expect Australia and Asean to lag, the former in US dollar terms on fuller valuations and a weak currency, and the latter as US Fed rate hike concerns emerge in an ongoing debtopia environment,” the report says.

Their economists forecast a continued global economic recovery in the second half and expect exports in Asia to grow alongside this. “We see few domestic policy headwinds but as for external policy, anticipation of the US Fed rate hike is likely to be a headwind for Asean markets and currencies, as well as for Hong Kong and Singapore,” the report suggests.

Adding: “Valuations in Asia ex-Japan are below longer-term averages with reason, as they reflect debtopia derating. So, performance will need to be driven by earnings. 'Reforms' is a key long-term theme we are structurally positive on but would be cautious of being caught in a reform-driven frenzy that could be short-lived.”