Post by chang on Dec 26, 2020 9:36:16 GMT
Executive summaries from DWS Emerging Markets (https://www.dws.com/en-hk/microsites/emerging-markets/):
Asia Equities Outlook Q4 2020 - We continue to be positive on Asia Ex Japan and expect the MSCI AC Asia ex. Japan index to outperform the MSCI AC World over the next 12 months
We continue to be positive on Asia Ex Japan and expect the MSCI AC Asia ex. Japan index to outperform the MSCI AC World over the next 12 months. Asia is our preferred region for 2021, whatever the US President election result is, with focus on Chinese, Taiwanese and South Korean equities.
China, Taiwan, and South Korea have so far handled the COVID crisis very successfully and – unlike EU or US – without piling up massive amounts of debt, supporting better mid-term economic growth prospects in Asia. These Asian countries would also have a greater scope to introduce stimulus in the future, if necessary.
This crisis has accelerated the rise of China. Similar to what happened during the Global Financial Crisis, China is once again leading the world economy out of the slump, evidenced by rebounding European and Japanese exports to China. (Source: CEIC, Haver Analytics, Goldman Sachs) China’s strong hold in global trade is further reflected during the coronavirus crisis. China’s export growth has been accelerating for the past 4 months with export growing at 10.2% year-on-year in the 3rd quarter.(Source: National Bureau of Statistics of China) The pandemic has disrupted global supply chain and China is able to make up for the loss in global production capacity with increased supply of medical equipment and electronic devices needed for remote working. This saw China’s share of world export rise to an all-time high of 14%. (Source: CEIC, Morgan Stanley). While China’s global export market share is likely to stabilise in 2021 as most economies open up, its role in the global economy is unlikely to diminish soon. We expect China to achieve about 2% GDP growth this year, while the rest of the world may be in negative territory in 2020.
While its western peers struggle with a bumpy recovery ahead with new wave of infection cases and lockdown measures, we expect EPS levels for the MSCI AC Asia ex Japan to surpass pre-Covid levels in 2021 ahead of the US and Europe at a growth rate of 11%. We assumed a 25% 2022 PE discount to the S&P 500, consistent with past valuation spreads, which leaves low teens return potential for the index from here.
www.dws.com/en-hk/microsites/emerging-markets/asia-equities-market-outlook-q4-20202/
EM Asia Market Outlook Q4 2020 - Against this backdrop, we stick to the view that long-term investors are best positioned with a diversified global portfolio - including a meaningful weight in Asia, especially North Asian countries
This summer, major equity indices continued to climb further. The strong performance is reminiscent of the long bull market of the 2010s, rather than the wild swings during the Covid-19 pandemic of 2020.
Equity markets are likely to continue to rally due to the low yielding environment, the lack of alternatives, and fear of missing out. However, equity investors are growing concerned about the stretched valuation. With the low risk-free rate, equity risk premium has to be lowered to maintain the stretched valuation. However, a lower equity risk premium seems impractical with high uncertainty surrounding issues such as the US election, US-China trade conflict, and Covid-19. In addition, although volatility level has retraced from its peak, it still remains elevated, higher than historical average. The stretched valuations make equity markets more vulnerable to downside risks and sudden corrections.
Against this backdrop, we stick to the view that long-term investors are best positioned with a diversified global portfolio - including a meaningful weight in Asia, especially North Asian countries - and do not express a strong regional equity market preference. While valuation in Asia is getting expensive based on historical comparison, slightly above average at 1.7x forward P/B, higher technology weighting in equity indices currently and relatively better quality structural growth, we believe that the long term valuation looks reasonable. Comparatively, developed markets are looking much more expensive.
At sector level, we remain underweight on real estate and utilities, neutral on Industrial and Material. Technology and healthcare remain our favourite. This pandemic has accelerated technology trends and highlighted the resilient earnings profile of the technology sector which make it very attractive. There are certain technologies in the area of online education, entertainment and food delivery for example, which could result in permanent changes in demand dynamics going forward.
www.dws.com/en-hk/microsites/emerging-markets/em-asia-market-outlook-q4-2020/
Asia Equities Outlook Q4 2020 - We continue to be positive on Asia Ex Japan and expect the MSCI AC Asia ex. Japan index to outperform the MSCI AC World over the next 12 months
We continue to be positive on Asia Ex Japan and expect the MSCI AC Asia ex. Japan index to outperform the MSCI AC World over the next 12 months. Asia is our preferred region for 2021, whatever the US President election result is, with focus on Chinese, Taiwanese and South Korean equities.
China, Taiwan, and South Korea have so far handled the COVID crisis very successfully and – unlike EU or US – without piling up massive amounts of debt, supporting better mid-term economic growth prospects in Asia. These Asian countries would also have a greater scope to introduce stimulus in the future, if necessary.
This crisis has accelerated the rise of China. Similar to what happened during the Global Financial Crisis, China is once again leading the world economy out of the slump, evidenced by rebounding European and Japanese exports to China. (Source: CEIC, Haver Analytics, Goldman Sachs) China’s strong hold in global trade is further reflected during the coronavirus crisis. China’s export growth has been accelerating for the past 4 months with export growing at 10.2% year-on-year in the 3rd quarter.(Source: National Bureau of Statistics of China) The pandemic has disrupted global supply chain and China is able to make up for the loss in global production capacity with increased supply of medical equipment and electronic devices needed for remote working. This saw China’s share of world export rise to an all-time high of 14%. (Source: CEIC, Morgan Stanley). While China’s global export market share is likely to stabilise in 2021 as most economies open up, its role in the global economy is unlikely to diminish soon. We expect China to achieve about 2% GDP growth this year, while the rest of the world may be in negative territory in 2020.
While its western peers struggle with a bumpy recovery ahead with new wave of infection cases and lockdown measures, we expect EPS levels for the MSCI AC Asia ex Japan to surpass pre-Covid levels in 2021 ahead of the US and Europe at a growth rate of 11%. We assumed a 25% 2022 PE discount to the S&P 500, consistent with past valuation spreads, which leaves low teens return potential for the index from here.
www.dws.com/en-hk/microsites/emerging-markets/asia-equities-market-outlook-q4-20202/
EM Asia Market Outlook Q4 2020 - Against this backdrop, we stick to the view that long-term investors are best positioned with a diversified global portfolio - including a meaningful weight in Asia, especially North Asian countries
This summer, major equity indices continued to climb further. The strong performance is reminiscent of the long bull market of the 2010s, rather than the wild swings during the Covid-19 pandemic of 2020.
Equity markets are likely to continue to rally due to the low yielding environment, the lack of alternatives, and fear of missing out. However, equity investors are growing concerned about the stretched valuation. With the low risk-free rate, equity risk premium has to be lowered to maintain the stretched valuation. However, a lower equity risk premium seems impractical with high uncertainty surrounding issues such as the US election, US-China trade conflict, and Covid-19. In addition, although volatility level has retraced from its peak, it still remains elevated, higher than historical average. The stretched valuations make equity markets more vulnerable to downside risks and sudden corrections.
Against this backdrop, we stick to the view that long-term investors are best positioned with a diversified global portfolio - including a meaningful weight in Asia, especially North Asian countries - and do not express a strong regional equity market preference. While valuation in Asia is getting expensive based on historical comparison, slightly above average at 1.7x forward P/B, higher technology weighting in equity indices currently and relatively better quality structural growth, we believe that the long term valuation looks reasonable. Comparatively, developed markets are looking much more expensive.
At sector level, we remain underweight on real estate and utilities, neutral on Industrial and Material. Technology and healthcare remain our favourite. This pandemic has accelerated technology trends and highlighted the resilient earnings profile of the technology sector which make it very attractive. There are certain technologies in the area of online education, entertainment and food delivery for example, which could result in permanent changes in demand dynamics going forward.
www.dws.com/en-hk/microsites/emerging-markets/em-asia-market-outlook-q4-2020/