Standard Chartered PLC is bullish about Asian equity markets this year, especially China and South Korea, as those trade-oriented economies would benefit from an easing of the US-China trade dispute and the improving global economy, Standard Chartered Bank (Taiwan) Ltd (渣打台灣銀行) head of investment strategy Allen Liu (劉家豪) said yesterday.
The investment bank said it preferred the Asian region over the Middle East and Latin America among emerging equity markets.
“China, South Korea and India are more attractive than other regions in Asia by valuation. Those markets are to benefit from subsiding trade tensions between US and China, given their roles in the whole supply chain,” Liu told a media briefing in Taipei.
Increasing trade activities around the globe will help drive China and South Korea equity markets, he said.
As Taiwan is part of the Asian market, “the outlook is positive,” he added.
Taiwan’s semiconductor companies will also be a beneficiary of the easing US-China trade dispute and grow along with their US technology clients, Liu said.
US corporations are expected to see net profits grow at an annual rate of 9 percent on average this year, recovering from last year’s flat performance, the bank said.
The strong growth would help boost US stock prices, offsetting concern over expensive valuation, it said.
Taiwan Semiconductor Manufacturing Co (台積電), which last year counted Apple Inc and Advanced Micro Devices Inc among its major clients, set an example as it saw its stock price soar 50.8 percent to NT$331 for the whole of last year, Taiwan Stock Exchange data showed.
Investors will continue seeking to diversify investment portfolios to reduce risks as the global trade environment and the electronics supply chain have changed due to the prolonged US-China trade row, Standard Chartered said.
Given the backdrop of stabilizing growth and supportive policymakers, equities — led by the US and Europe — are expected to outperform bonds, Standard Chartered’s newly released Wealth Management Advisory said.
Emerging market bonds should outperform developed market bonds, the report said.
“As major central banks have already eased significantly, we believe they are likely to either leave policy as is or possibly ease a little further,” Standard Chartered Private Bank chief investment strategist Steve Brice said in the report.
“The focus is likely to shift to fiscal policy where government spending in both major emerging and developed markets could turn increasingly supportive of growth. This will help equities outperform bonds,” Brice said.
Turning to the foreign exchange market, the US dollar is peaking after trending higher since early 2018 and was likely to begin a broad-based downtrend, the report said.
The euro and British pound are likely to be the biggest beneficiaries on the back of fading US economic exceptionalism, narrowing economic growth and interest rate differentials as well as political uncertainty shifting from Europe to the US presidential election, it said.
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