Asia Essentials

The commodity & oil downtrend lasting longer than two years has been givingway to a normalisation since the beginning of 2H16. We expect it to becomemore evident in 2017, with strong signals from macro indicators such as CPIand exports. However, absent an uptrend in real demand, the positivemomentum will not be easy to sustain. As such, we overweight sectors withhigh visibility of earnings growth and cheaper valuations vs growth. Our toppicks are SEC, SK Hynix, KB FG, HMF, S-Oil, POSCO, Lotte Chem,Hanssem, Naver, and E-Mart. We underweight downstream tech, consumer,autos, and heavy industries.