Visitors Now:
Total Visits:
Total Stories:
Profile image
By ETF Daily News (Reporter)
Contributor profile | More stories
Story Views

Now:
Last Hour:
Last 24 Hours:
Total:

BlackRock: Big Gains Coming for Emerging Asia

Wednesday, November 2, 2016 7:01
% of readers think this story is Fact. Add your two cents.

(Before It's News)

globeEmerging Asia has faced pervasive headwinds in recent years, but we believe the region is at a turning point. BlackRock’s Richard Turnill explains with the help of this week’s chart.

Emerging Asia has faced pervasive headwinds in recent years, but we believe the region is at a turning point. We see a number of underappreciated tailwinds supporting the case to invest there. This week’s chart shows two of the tailwinds gathering momentum: a nominal growth rebound in China and improving corporate profits.

undefined

China’s nominal gross domestic product (GDP) rebound is reflected in producer prices turning positive year over year for the first time in nearly five years last month. See the chart above. We see this reflationary shift taking hold as growth in China stabilizes. This should support emerging market (EM) Asia, as business cycles and market returns there are increasingly correlated with those in China.

Reflation across EM Asia is reflected in improving corporate profits. The shift away from the steep earnings downgrades of years past is evident in the chart above. EM Asia currencies have also stabilized this year, and the region has relatively high credit ratings among EMs. Finally, strong macro fundamentals and demographics support the region’s improved economic outlook.

Investors are tiptoeing back into the region: Foreigners have bought a net $13 billion of regional bonds this year and appear to be returning to equities. They likely have room to up allocations: $71 billion has left Asia ex-Japan bonds and stocks since the mid-2013 “taper tantrum” set off by the Federal Reserve (Fed) signaling an end to bond purchases, according to EPFR Global data. We don’t expect a tantrum replay, as we see the Fed raising rates gradually. Plus, EM Asia appears in better shape now than in 2013. We do see policy-related risks to China’s growth such as new property curbs. EM Asia also faces the potential challenges of renewed U.S. dollar strength, U.S. protectionism post-election and geopolitical crises.

Overall, we see compelling reasons to invest selectively in EM Asia long term. We favor assets in Indonesia and India. Rate cuts in Indonesia support more corporate investment and consumer spending, while India has implemented key reforms to its tax system and bankruptcy code. Read more market insights in my Weekly Commentary.

This article is brought to you courtesy of BlackRock.

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)

Report abuse

Comments

Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories

Register

Newsletter

Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.