China and Singapore should stay as the top two market picks for stock investors in Asia as the region faces the impact of higher oil prices and inflation, Macquarie Group Ltd said.

Investors should own more shares in China and Singapore than suggested in regional benchmarks, analysts Tim Rocks and Daniel McCormack recommended in a report released yesterday. They also increased their suggested weighting for South Korea and cut that for India, two of five markets they recommend investors should own less than suggested by regional stock measures.

"China will deliver the strongest earnings growth this year while in Singapore a US recession is fully priced in," Rocks and McCormack said. A weakening in the won could boost export earnings of South Korea's companies while "downside risks are growing" in India, they said.

Corporate earnings will probably increase between 15 percent and 20 percent this year in China, according to Macquarie's analysts. Separately, Singapore's stocks are trading at 11 times earnings, the cheapest in the Asia Pacific region, according to Bloomberg News data.

CSI 300 slumps

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, has slumped 33 percent this year while Singapore's Straits Times Index has declined 9.7 percent.

The analysts cut their suggested weighting for property and consumer stocks as rising inflation and interest rates slow spending.

They have increased their weighting for banks, saying finance is "now one of the cheapest sectors in Asia" while credit growth is "very strong" with the prospect of accelerating in most countries in the region.

(Shanghai Daily May 29, 2008)