John Pellegry, Asian equities product director at Invesco Perpetual, says investors should position their portfolios for potentially "choppy" markets in Asia.
Over the last three to five years, Asian markets have delivered positive returns for investors. But John Pellegry, Asian equities product director at Invesco Perpetual, is warning investors to expect a deceleration of global growth and the Eurozone debit crisis to continue to impact on Asian markets.
Now’s the time, he says, for investors to position their portfolios for potentially “choppy” markets. However, there’s value to be found in that Asian markets are cheaper than they were a year ago, so Pellegry and his team are not expecting overall returns to be “particularly negative”.
Some Asian countries performed well throughout the year, reports Pellegry. These included the ASEAN economies of the Philippines and Indonesia, where trade flows were less exposed to developed market demand and inflation concerns less pressing than in some of the larger emerging markets. “We remain exposed to these markets, with holdings in companies that can continue to benefit from the domestic investment cycle, but remain vigilant about the earnings expectations implied in some stock valuations.”
“Asia has its own domestic challenges with the Chinese property market at the core, but the authorities have been proactive in tackling these,” explains Pellegry. “More importantly, markets are discounting mechanisms and we believe that current low valuation levels are already pricing in a difficult outlook, while Asian policy flexibility should prove supportive. The region continues to offer premium nominal growth and long term fundamental advantages (demographics, low debt, healthy banking system and so on) which investors may find difficult to ignore as and when the dust settles.”
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