Ratings for Thailand and the Philippines were raised to overweight from underweight, analysts Sakthi Siva and Kin Nang Chik wrote in a report yesterday.

Thai financial and energy companies and Philippine telephone companies were among the most undervalued, they said.

Southeast Asia is at a 142% discount to Taiwan, Credit Suisse said, citing its price-to-book versus return-on-equity model.

That’s almost four times the average discount of 37% since the brokerage began tracking the data in December 2001. Equities in the Association of Southeast Asian Nations (Asean) are 17% cheaper than the rest of the region.

“In the last eight years, there have been only about six months when the discount was bigger,” the analysts wrote. “Four of the six most undervalued countries are in Asean. In contrast, Taiwan is the most overvalued market.”

Credit Suisse added to Indonesia’s share of the model portfolio and pared Taiwan’s position by dropping Taiwan Semiconductor Manufacturing Co, the world’s largest custom chip maker. The stock accounts for almost 8.6% of the Taiex index, the largest by weighting.

The Taiex index jumped 49% this year as closer ties with China drew foreign investors, helping the island’s benchmark index to one of the 10 best performances globally. Among the five largest stock markets in Asean, only Indonesia has rallied more.

Indonesian coal, palm oil and consumer companies and Singapore industrial stocks offer the largest discounts, the analysts added. The brokerage last month raised its rating on Singapore to overweight from underweight and upgraded Indonesia to overweight from neutral.

An improving outlook for earnings in Southeast Asia is supporting Credit Suisse’s upgrade of the region, the report said. Analysts last month started raising earnings-per-share forecasts for Indonesia, the Philippines, Malaysia and Singapore, while Thailand had upgrades at the start of June.

Thailand is one of the most “under-owned” among Asian emerging markets, the analysts added. Kasikornbank Pcl, Thailand’s third-biggest commercial lender by assets, and Bank of Ayudhya Pcl, a lender controlled by General Electric Co, are among Thai stocks in Credit Suisse’s portfolio.

The brokerage recommended that investors own shares of Philippine Long Distance Telephone Co, the nation’s largest phone company, and hold PT Bumi Resources and PT Astra International in Indonesia. — Bloomberg

This article appeared in The Edge Financial Daily, June 9, 2009.