OCBC Investment Research raised its target price of CapitaMalls Asia Ltd to S$1.79 from S$1.76 and kept its 'buy' rating, citing stronger valuations for the shopping mall developer's China assets and listed entities.

By 0103 GMT, CapitaMalls shares were 0.6 per cent higher at S$1.59, and have surged about 40 per cent since the start of the year, compared to the Straits Times Index's 10 per cent gain.

CapitaMalls said on Monday it had set up a $1 billion private equity fund. OCBC said the fund would be an option for capital recycling going forward, and could be a potential joint venture partner for future developments, giving CapitaMalls bigger scope for capital allocation for acquisitions.

"CapitaMalls' valuation remains undemanding, and we see significant upside as its asset pipeline transitions into an income-generating portfolio over 2012," OCBC said in a report.