Asia and emerging markets could be going through a “bear-market bounce,” said Jasslyn Yeo (楊媚), a global market strategist and money manager with JPMorgan Asset Management.
While there is the potential for more gains in the first half of the year after the rally last month, investors will need to reassess their positions for the second half, Yeo said.
Slowing economic growth globally is clouding the outlook for stocks even as a potential trade deal between the US and China would help risk-on sentiment, Yeo said.
Moreover, while the US Federal Reserve signaled that it is pausing its interest-rate increases, there are still higher odds of hikes than cuts, she said.
“I am not willing to back off on the whole bear-market bounce story because there are increasing downside risks to growth,” she said in an interview on Friday last week.
Her firm managed US$1.71 trillion of assets as of September last year.
However, the rebound could last only in the first half of this year because “we are in such a late stage of the cycle and recession risks have increased,” she said about the US economy.
With a 6.8 percent rally last month, the MSCI Asia Pacific Index had its best start to a year since 2012. The benchmark gauge for emerging-market equities climbed even more, 8.7 percent. Both are still in bear markets.
While Yeo did not provide any stock-market estimates, she said she remains bullish on Asian shares excluding Japan and emerging markets in general for the first half of the year.
Her reasoning is that there is a higher chance of a US-China trade agreement this time around as US President Donald Trump faces a re-election bid next year and the world’s second-biggest economy is slowing.
Trump said he might meet soon with Chinese President Xi Jinping (習近平) to finalize details of a deal.
Among Asian equities, Yeo said she prefers China, South Korea and Indonesia, and remains cautious on India and the Philippines.
Emerging markets are likely to outperform their developed counterparts in a risk-on environment because of their higher beta, she said.
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