Stocks in Asia excluding Japan will remain in a “sweet spot” for the next two quarters, with a benchmark index poised to rise 18 percent, according to Deutsche Bank AG.
The MSCI Asia excluding Japan Index may rise to 522 in the next year, helped by an economic recovery, the levels of cash available, “accommodative” policies and the weak US dollar, analyst Niklas Olausson wrote in a report.
South Korea, Taiwan and Singapore were upgraded to “overweight,” while markets in China and the Philippines had their ratings lowered, he added.
The MSCI Asia excluding Japan Index fell 1.1 percent to 443.63 as of 10:17am in Singapore. The measure has rallied 54 percent this year, helped by speculation that the worst of the global financial crisis has passed.
“Near term, there is potential for indexes to exceed our target as expectations for the 2010 recovery accelerate,” Olausson wrote in Friday’s report. “The region should remain in the sweet spot for the next two quarters.”
The US will grow at a 2.9 percent annual rate this quarter, pulling the economy out from its worst slump since the 1930s, according to the median of 61 estimates in a monthly Bloomberg News survey. France, Germany and Brazil are among nations that have already emerged from recession.
“Despite concerns about inflation and policy tightening, Asia remains near the sweet spot of the cycle for stocks, currencies and corporate credit,” said economists led by TJ Bond at Bank of America Corp’s Merrill Lynch unit in a report on Friday. “Over the next two to three quarters, we expect growth to accelerate.”
South Korea is Deutsche Bank’s top pick in Asia given the earnings outlook for exporters and the market’s valuations, according to the report. The brokerage is “bullish” on Samsung Electronics Co, LG Corp, Korea Exchange Bank and LG Chem Ltd.
Deutsche Bank downgraded China to “neutral,” citing a slowdown in the nation’s economic recovery and concerns of a tightening in fiscal and monetary policy. Thailand was raised to “neutral,” while the Philippines was cut to “underweight,” the analyst added.
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