>ASIA FINANCIAL STRATEGY: Is the grass greener on the other side? (KEEFE, BRUYETTE & WOODS)

Colleagues returning from visits to continental Europe report quiet holiday retreats, vacant homes and empty shops. Yet much of Asia is very different, with vibrant activity and signs of growth.

For investors with a cautious view of the global economy Asia financials can offer defensive qualities, in our view. We screen banks using criteria that are generally considered indicators of defensiveness.

■ We screen consensus bank data for names that have a 2011 consensus PE below 12x, consensus eps growth above 10%, a dividend yield above 3%, a beta below 1.2 and a tangible common equity ratio above 5.5%.

■ The scan highlights defensive characteristics in names in Hong Kong, China and SE Asia.

■ China names qualify because despite capital raisings, dividend yields have remained high.

■ India and Indonesia banks are clearly more growth oriented. They fail the defensive screen with low dividend yields and in the case of India with high valuations.

■ Covered names highlighted include:
■ Daegu (005270.KS, KRW 13850, Outperform)
■ BOC(HK) (2388.HK, HKD 20.55, Market Perform)
■ Hang Seng Bank (11.HK, HKD 107.60, Market Perform)
■ ICBC (1398.HK, HKD 5.74, Market Perform)
■ CCB (939.HK, HKD 6.60, Outperform)
■ BOC (3988.HK, HKD 4.04, Outperform)
■ The screen is arguably too defensive. Growth markets can continue to perform strongly, in our view, if global growth does not deteriorate further, inflation pressures in those countries remains in check and policy globally avoids a protectionist lurch.

To read the full report: ASIA STRATEGY