Rallies on global bourses might continue over the next six months, as the landscape looks fair ahead, boding well for corporate earnings, JPMorgan Asset Management said in Taipei yesterday.
The US fund house favors equities over bonds this year, and regionally prefers South Korean shares over Taiwanese stocks due to concerns that demand for smartphones has become increasingly saturated.
Taiwan is home to major suppliers of electronics parts used in smartphones, laptops, connected vehicles, artificial intelligence and Internet of Things applications.
“We do not see signs of a turnaround in the global economy, which might pick up further growth momentum this year based on key barometers, such as purchasing managers’ indices,” Hong Kong-based JPMorgan chief Asia strategist Tai Hui (許長泰) told a news conference.
Business confidence worldwide remains at healthy levels, while consumers have been more generous about spending and offset investment declines in some countries, he said.
The backdrop warrants a more aggressive investment strategy, under which equities holdings should rise to 60 percent, bond positions account for 30 percent and alternative investment assets or cash take up the remaining 10 percent, he added.
Central banks might take cues from the US Federal Reserve and normalize their balance sheets, but such moves might not stop capital flows to capital markets, as seen last year, the economist said.
The US dollar failed to gain value following the Fed’s interest rate hikes or its offloading of assets.
“The depreciation trend might extend into this year and next year, as a cycle usually lasts for three years,” Hui said, adding that the greenback has still moved above its 10-year average, suggesting more room for corrections.
Still, bond holdings should constitute a significant share to defend against market volatility that is set to deepen this year, while returns on cash remain quite low, he said.
JPMorgan Asset Management is positive about bourses in Europe, China, South Korea and Southeast Asia, he added.
Compared with Taiwan, South Korea has brighter business spots, even though last year it impeached its first female president and suffered from geopolitical tension caused by North Korea, Hui said.
“That is because investors assign more weight to corporate profits,” he said.
On the other hand, Taiwan is susceptible to lackluster smartphone sales due to a heavy focus on a few business sectors, he added.
On-shore fund sales totaled NT$2.32 trillion (US$78.5 billion) at the end of last year, a 9.18 percent increase, or NT$195 billion, from a year earlier, the Securities Investment Trust and Consulting Association (投信投顧公會) said.
First Securities Investment Trust Co (第一金投信) attributed the pickup to risk appetite improvement.
Cross-border equity funds made the biggest advancement, followed by cross-border indexed equity funds and cross-border debt funds, the local fund house said.
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