Asian regional economic growth should improve to 6.9 per cent from 6.2 per cent - the largest improvement to growth since 2003. Corporate earnings growth should accelerate to 13 per cent and 14 per cent in 2013 and 2014 respectively, Goldman Sachs said.
"We are overweight markets where we see favourable growth ‘deltas’ and where valuations are attractive," the investment bank said in a report on Monday.
Development over the last few weeks - the US fiscal compromise and firmer Chinese outlook on growth and policy – have already led to a small rally in Asian markets, Goldman said.
The most important sectoral rotation in 2013 will be from defensives to cyclicals. Goldman has upgraded autos and capital goods to "overweight" and downgraded telecom services to "underweight".
1) Bajaj Auto and Tata Steel: These stocks may return over 15 per cent in 2013 because they are likely to benefit from better economic growth and have a sharp improvement in earnings in 2013. Their sales growth has historically shown a close relationship with and been highly leveraged to regional GDP growth. These cyclical stocks are expected to have at least 15 per cent acceleration in their 2013 earnings growth (versus 2012).
2) Infosys: It has a good chance to rebound in 2013.
3) Tata Motors, Sterlite Industries, Hindalco Industries: These are top-down stock ideas. They have been chosen based on their macro affinities as well as their micro characteristics in terms of earnings, valuation and technical indicators.