Bali, Indonesia: Asian stocks will be the world’s best performers this year as earnings growth in the region rebounds first and the Chinese government’s stimulus programme bolsters the economy, Credit Suisse Asset Management Securities Inc. said.
Upbeat trend: Traders at a brokerage firm in Taipei, Taiwan on Monday. China and Taiwan led Asian developing markets that make up half of the 10 best performing stock indices in 2009. Wally Santana / AP
Asian shares are attractively valued and the region’s currencies may also strengthen over the next two years, boosting the outlook for corporate earnings, said Bob Parker, who helps oversee $600 billion (nearly Rs30 trillion) as London-based vice-chairman of Credit Suisse Asset.
After Asia, investors should buy stocks in Latin America and the US, as Europe and Japan underperform, he added.
“Asian equity markets, particularly if you look at price-earnings figures relative to dividends, earnings growth and GDP growth, are very cheap indeed,” Parker said on Monday in Bali, where he is attending a conference.
Asian developing markets make up half of the 10 best performing stock indices in 2009, led by China and Taiwan. The MSCI Asia-Pacific excluding Japan Index has jumped 18% this year, compared with a 2.9% retreat in the Standard and Poor’s 500 Index.
China is the sole country whose economy is starting to show “significant improvement” in growth, helped by the government’s 4 trillion yuan (Rs29.72 trillion) stimulus plan, Parker said.
He expects the economy to expand “close to 8%” in the second half.
The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 50.1 in April, signalling that the nation’s manufacturing expanded for the first time in nine months, according to a statement on Monday.
China’s economy grew 6.1% in the first quarter, the slowest pace since at least 1999.
China is among emerging markets that will “break out” into a bull market at the end of the year as falling interest rates and easing inflation make equities more attractive, Templeton Asset Management Ltd’s Mark Mobius had said in Bali on Sunday.
Companies that supply commodities and cater to consumer spending in the world’s third largest economy are among the best bets, said the fund manager, who helps oversee $20 billion in emerging market assets.
Still, a rally in Chinese equities means that valuations have become less attractive, prompting Credit Suisse Asset Management to trim some holdings in the country’s domestic stock market in March, Parker said.
The benchmark Shanghai Composite Index is valued at 27 times reported earnings, up from a low of 13 times in October, according to data tracked by Bloomberg.
“What we did in December is that we took positions in emerging markets, notably in China and Brazil, and what we did recently was we broadened those positions in Asia by taking some risk off the table in China and maintaining our positions by diversifying into India and Korea and Taiwan,” Parker said.
Within Asia, Credit Suisse Asset favours infrastructure-related companies in India and technology shares in South Korea and Taiwan, he said, without naming any companies.