In Hong Kong, buy the big stocks. This is one message gleaned from a 600-page quantitative research effort that covers 11 years of stock performance in Asia and took ING eight months to prepare.
Before picketing the investment bank with 'Save the Trees' signs, keep in mind that the next best-performing stocks by size are Hong Kong's small-caps.
Other surprising results are that the commonly bandied financial price ratios are poor indicators of an Asian stock's future success.
Neither the price-earnings ratio nor the up-and-coming enterprise value to earnings before interest, tax, depreciation and amortisation (EV/ebitda) ratio are key indicators of success.
The latter ratio has grown in popularity in the region for comparing sector stocks across borders. ING said it was best to look at how the sector performed in each Asian market.
In Taiwan, for instance, technology stocks with high operating profits are the best performers in that sector. ING would recommend a long-short strategy around this ratio rather than looking for cheap price ratios.
'On the whole, prospective ratios are pretty useless,' said Asia strategist Markus Rosgen, who headed the study. 'In Asia, it's better investing on information you know rather than doing a two-year forecast for earnings.'
