Credit Suisse Remains Upbeat On Japan, China, Taiwan; Turns Cool On India, Indonesia

Tom Burroughes

7 October 2014

Credit Suisse’s private banking and wealth management arm remains positive on Japanese, Taiwanese and Chinese equities while it is turned neutral on India and has an “under-perform” stance on Indonesia.

Overall, the Swiss bank said there is likely to be a “tactical pullback” in Asian equities in the coming weeks, due to a stronger dollar, certain October “event risks” and political issues in jurisdictions such as Hong Kong. The recent pro-democracy protests in Hong Kong – which have led a number of banks to shut branches temporarily – have increased pressure on local equities.

For the Asia-Pacific region as a whole, has a “neutral” asset allocation stance; it has an “outperform” view on Asia ex-Japan.

On another, negative theme, Credit Suisse said a sharp depreciation of the yen exchange rate has hit South Korean exporters who have, as a result, lost a competitive advantage in selling to the Japan market.

“We are adopting a more defensive investment strategy with a focus on Asian reformers and dividend stocks,” the bank said in a quarterly investment outlook note yesterday.

“Within emerging markets, we are retaining our overweight in Emerging Asia due to its stronger growth momentum, its exposure to the developed market recovery and its positive reform progress. The G3-exposed North Asian markets continue to lead in terms of earnings momentum among regional peers,” it said.

“The three markets we expect to outperform – Japan, Taiwan and China – are leading in terms of 3-month changes in consensus earnings per share. Earnings momentum of the ASEAN markets and South Korea remains in negative territory, with Malaysia, South Korea and Singapore seeing the worst earnings downgrades in the past month,” it said.