Market observers said that, from a medium-term perspective, global equities are more favorable to investors than bonds due to equity markets’ bullish sentiment and reasonable valuations.
HSBC Global Asset Management chief investment officer in the Asia-Pacific region Bill Maldonado said that equity markets might see positive performances during a recovery phase, just like the pace of continuous recovery seen in the global economy this year.
“We believe that the global economy will not fall back into a period of recession, as we see the US very clearly on a growth path,” Maldonado told a media briefing in Taipei yesterday.
Recent declines in crude oil prices might boost growth further, Maldonado said. Given the diverging monetary policies of major central banks, liquidity might peak only at the end of next year, he said.
Therefore, the earnings yield of global equities looks more attractive than that of government bonds this year, he added.
Moreover, Asian equity markets might outperform peers in the US and Europe, as most of the markets in the region are net oil importers, which should be the major beneficiaries of lower oil prices, according to HSBC.
“We favor equities in North Asia, including China, which is the cheapest market in the region and also one of the cheapest in the world based on its valuation,” Maldonado said.
Maldonado said reforms in China might have a positive impact on the country’s economy and market in the medium-to-long-term.
In the meantime, Indian equities will also be one of the top picks in the region based on their re-rating potential, with corporate earnings expected to mean revert as the economy gets back on the growth track, he added.
Jordan Chen (陳朝燈), chief investment officer of Schroder Investment Management Taiwan Ltd, is also bullish on Asian equity markets this year, but said the US equity market might provide attractive returns, with technology-driven and transportation stocks his top picks.
Investors should avoid Russia’s equity market this year, as the country’s natural resource-related stocks are set to underperform their peers because of weak oil prices.
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