Hong Kong is set for an economic recovery and this makes the territory's stocks the best value in the region, a regional brokerage says. DBS Securities director of economic research Kaan Quan Hon said the potential for an earnings rebound put Hong Kong at the top of the group's regional rankings. 'Hong Kong is a good recovery story,' he said. 'With the market up sharply since August it is vulnerable to profit-taking in the short term, but the outlook is positive for next year.' Mr Kaan said on a six-month time horizon, DBS placed Hong Kong ahead of the Philippines, Malaysia, Singapore, Indonesia and Thailand as the most preferred market in the region. Hong Kong's position came despite the Hang Seng Index recently reaching new highs and the fact that a rebound was overdue in a number of other regional markets. The rise in Hong Kong stocks since August has been aided by investor disaffection with neighbouring markets. Mr Kaan said the stage in the economic growth cycle reached by these countries revealed why investors were choosing Hong Kong. Hong Kong's economy had reached the bottom of the cycle and was starting to improve, while others had almost peaked were heading down the other side. The Philippines was ranked the second most attractive market in the region as its economic recovery is still underway and earnings growth remained firm. Malaysia and Indonesia were less attractive due to flat or slowing growth, and rising costs, which further impaired the performance of stocks. Singaporean companies will produce unexciting earnings as the economy undergoes a cyclical slowdown. Thailand ranks as the least attractive market in the region as export growth will be sharply below last year's level and earnings growth will be punished in the short term. Mr Kaan said Hong Kong's premier status was confirmed by a number of positive factors, including the pick up in China's economy and the outlook for stable US interest rates. Mr Kaan said the major threat to Hong Kong stocks over the next six months was the possibility the US Federal Reserve may yet turn tail and raise interest rates despite the string of mild economic data. 'Hong Kong continues to be a major beneficiary of the Federal Reserve's decision to put monetary policy on hold,' he said.