Emerging Markets

Barings Tips Asia Equity For 2013

Sally Ling London 7 January 2013

Barings Tips Asia Equity For 2013

The outlook for equity markets across Asia ex Japan is positive according toBaring Asset Management. The firm notes that despite volatility, Asia was one of the top performing regions in 2012; the MSCI AC Asia ex Japan Index rose by 22.6 per cent in US dollar terms over the year. This compares to returns of 18.6 per cent and 16.8 per cent from the MSCI Emerging Markets Index and the MSCI AC World Index respectively.

Barings predicts that stabilisation of the external environment, coupled with robust economic growth within Asia, will be positive for Asian equities. The firm expects this will lead investors to refocus on the attractive fundamentals of the region, such as low levels of indebtedness and rising domestic consumption and investment. This should result in Asian economies growing at a superior rate relative not only to the developed world, but also to other emerging markets.

Barings is optimistic about China’s prospects in 2013. The firm notes that the Chinese economy was weaker than expected in 2012 and that this was a drag on regional equities. However it says that there are now signs that policymakers have achieved a “soft landing” and expects to see relatively robust growth in China over the coming months. On a sector level, Barings favours materials, which it believes will benefit from rising spending in areas such as smart grid, irrigation works and alternative energy. It also feels that selected Chinese financials should deliver strong performances in 2013.

Outside of China, Barings favours Indonesia and Thailand, where it believes certain companies are well placed to capitalise on long-term regional growth, rising consumption and investment in infrastructure. In particular, the firm feels that consumer-related sectors, such as consumer health and pharmaceuticals, will benefit from the region’s rapidly growing middle class.

In Korea, Barings expresses a preference for the technology sector. It observes that demand for mobile devices, such as smartphones and tablets, continues to grow and Korea is positioned at the core of this. The manager’s positive stance on technology is, however, offset by caution on other areas of the Korean market such as financials, utilities and telecom services.

“Although a degree of volatility will likely persist, we believe that equity markets are on a stronger footing and we are confident that the superior growth and fiscal dynamics of Asia ex Japan will lead to regional equities delivering attractive returns over 2013,” HyungJin Lee, director, Baring Asia Pacific equities team, said in a statement.

 

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