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Investment Data Ranking (Monthly)
How do we identify the most attractive banks going forward?
as of 26 Mar 2010

There are a number of distinct investment strategies investors apply to pursue returns: Those are value, growth, momentum, and income strategies

A value/growth strategy, momentum strategy, and dividend yield based strategy can potentially help identify stocks that generate significant total shareholder return but also differentiate those that destroy shareholder value. Although there is an ongoing debate concerning the underlying reasons, broadly speaking, the excess return of these strategies may be attributable partially to risks involved and partially to behavioral biases that investors either under-react or over-react to new firm-specific information.

Our rank is based on four groups of indicators:

  • Value indicators (P/E ratio and P/B ratio)
  • Growth indicators (1 year annualized EPS growth rate)
  • Momentum indicators (Prior 6-month total shareholder return)
  • Income indicators (Dividend yield)

Although there are different ways to identify the most attract bank stocks going forward, we calculate the composite score based on each bank’s value indicators such as P/E and P/B compared with its historical valuation and the valuations of peer companies in its domestic market. Our research has shown that value strategy is more effective than other strategies for Asian banks.

Definitions of indicators:

  • Market Capital: Share price multiplied by the number of ordinary shares in issue (in US$ millions).
  • Liquidity: Prior 12-month’d average daily trading volume (in thousands).
  • P/B Ratio: The market value of the common equity divided by the balance sheet value of the common equity in the company.
  • P/E Ratio: Latest annualised rate that may reflect the last financial year or be derived from an aggregation of interim period earnings.
  • Dividend Yield: The dividend per share as a percentage of the share price. Dividend per share is based on an anticipated annual dividend and excludes special or once-off dividends.
  • Total Shareholder Return: It indicates a theoretical growth in value of a share holding over a specified period, assuming that dividends are re-invested to purchase additional units of an equity at the closing price applicable on the ex-dividend date.
  • EPS Growth: The growth rate of current EPS compared with 1-year ago EPS.

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