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DBS ‘overweight’ on Asian equities in mid to long term

SINGAPORE – Equity markets in Asia Pacific outside of Japan may see near-term uncertainties due to subdued performance by developed markets, while fears of quantitative easing tapering in the United States continue to loom large.

SINGAPORE – Equity markets in Asia Pacific outside of Japan may see near-term uncertainties due to subdued performance by developed markets, while fears of quantitative easing tapering in the United States continue to loom large.

These factors have led DBS to take a “neutral” stance for regional equities for the next three months, chief investment officer Lim Say Boon said at a global market outlook conference on Monday.

“We are three-months neutral on emerging markets in Asia Pacific ex-Japan, generally on two reasons. One, we have this divergence in economic performance between emerging markets and developed markets,” Mr Lim said, pointing to conflicting purchasing managers’ indices between China and the US since May.

“And of course, there’s the added uncertainty about the tapering of quantitative easing and its impact on US treasury yields, which will periodically drive volatility in emerging markets, with potential fund outflows pressuring equity markets and currencies over the next few months,” he added.

But on a 12-month term basis, DBS maintains an “overweight” stance for equities in Singapore and other regional markets.

Agreeing, Mr Manraj Sekhon, chief executive of Fullerton Fund Management, said advises that now is the right time to invest in Asian equities.

“If you look at the valuations of Asian companies, they’re still at a very low level – by some measures at a historic low … I would say Asia is still cheap relative to the developed world. So I don’t think this is the time to be exiting Asia or emerging markets,” said Mr Sekhon.

“Yes, there are issues and stresses. But this is not a bad time for bottom-up investors to look at Asia closely and to find the winners over the next 12 to 24 months,” he added.

Meanwhile, Japan looks set to rebound from its previous malaise as economy and politics further stabilises under the Abe administration.

“I look at Japan as a once-in-a-decade opportunity for investments. What has been wrong with Japan is a lack of confidence due to administration turnovers. But that’s what has changed with Abenomics,” said Mr Wang Yu-Ming, international chief investment officer at Nikko Asset Management.

“The political odds have changed now in favour of some stability… we’re confident that the administration is here to stay and is able to articulate and implement real political changes,” he said. “If I have one bet to make, I would bet it on Japan.”

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