March 25 (Bloomberg) -- Investors should buy stocks in Taiwan, stick to Malaysian companies with stable dividends and accumulate South Korean exporter shares, UBS AG says.

Optimism following Ma Ying-jeou's presidential election victory will help Taiwan outperform other markets in the region, analysts at UBS said in a note today. The poor showing of Malaysia's ruling coalition in recent elections may lead to a political stand-off in the nation, the brokerage wrote, while a U.S. recession is already priced in to the South Korean market.

``Taiwan's set to outshine other markets,'' UBS analyst Ken Chen wrote. Investors should ``overweight'' Taiwan's financial, property, retail and cements stocks, as those sectors will benefit from Ma's policies, according to Chen.

Taiwan's Taiex index has risen 3.4 percent this year, the biggest gainer among Asia's major stock benchmarks. South Korea's Kospi and Malaysia's stock index have both slumped more than 11 percent, in line with an 11 percent drop in the MSCI Asia Pacific Index.

Ma's plan to improve relations with mainland China will cut political risk, luring about $50 billion into Taiwan's markets in the next few months, Chen said. That will raise the value of the local stock market to 16.7 times earnings from 14.2 now, he said.

``Investors can expect positive policy changes that will enable Taiwan's economy to reconnect with China's growth,'' Macquarie Group Ltd.'s analyst led by Daniel Chang said in a note today. Macquarie's analysts suggested owning stock in technology companies with rising market share and business related to China, such as Taiwan Semiconductor Manufacturing Co. and Asustek Computer Inc.

Malaysia faces ``near-term policy paralysis'' after opposition parties won almost half of the contested states in March 8 elections, and that could send the Kuala Lumpur Composite Index lower this year, UBS analyst Colber Nocom said.

Investors should shift assets to Malaysian companies with solid dividends, such as Public Bank Bhd., Digi.Com Bhd. and Bumiputra-Commerce Holdings Bhd., Nocom said. He also recommended IJM Corp. and UEM World Bhd., two of the nation's biggest construction companies.

In South Korea, investors should ``overweight'' automakers, technology companies and banks, while avoiding companies that will suffer from the weakening won, such as airlines and importers, according to UBS's Young Chang.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net

Last Updated: March 25, 2008 04:57 EDT