Asean markets to trail behind the East Asian markets
BENGALURU: East Asian stock markets are broadly expected to rise through the rest of this year, driven up by solid economic growth and company earnings even as central banks across the region move towards tighter monetary policies, a Reuters poll found.
While most major world stock indexes are forecast to continue rising in the latest global survey covering 22 indexes taken June 19-28, a clear outperformance is expected in emerging markets, and particularly in Asia.
"Within emerging market equities, Asia remains our preferred region," William Hobbs, head of investment strategy at Barclays, said in a note to clients. On a strategic basis, he sees South Korea, Taiwan and China offshore as the "highest conviction" bets in Asia.
According to the Reuters poll, Asian stock market indexes expected to perform the best from now until the end of the year are those in India, China, South Korea, Japan and Australia.
In terms of full calendar year gains, India is forecast to be in the lead, followed by Japan, South Korea, Australia and China.
Much, of course, will depend on trade and increasingly, the U.S. administration's approach to it.
"With the region's earnings sensitive to the trade cycle, what President Trump decides to implement in regards to trade policy is important," Hobbs wrote.
Trump is unhappy with China over its inaction on North Korea, according to administration officials, and is considering options including tariffs on steel imports. But it is unclear whether he will take any action.
In the meantime, central banks in Australia and India have switched to a neutral monetary policy while China is showing signs it may gradually tighten more this year as it looks to reduce risks in the financial system.
China's yuan has strengthened more than 2 percent so far in 2017, even as the People's Bank of China moved aggressively in May to flush out speculative bets, and has already nudged up short-term and money market rates several times this year.
But with the Bank of Japan and the European Central Bank still engaged in large-scale asset purchases, there is still plenty of cash swirling around in the financial system looking to find a home and stocks are the asset class of choice for global investors still searching for yield.
Having risen over 2 percent since the start of this year, the Shanghai Composite Index is expected to gain another 4 percent in the next six months to reach 3,300. It will rise to 3,325 by the end of June 2018. Those predictions were slightly weaker from those just three months ago.
* South Korea's Kospi, which has risen about 18 percent so far in 2017, is expected to continue climbing, although more slowly, reaching 2,473 by year-end, up almost 4 percent from Wednesday. It will close at 2,530 at end-June 2018, stronger than March's forecast, according to the poll.
* Hong Kong's Hang Seng index to rise over 2 percent to 26,250 by the end of the year from Wednesday's close of 25,683.50. This projection is slightly weaker than estimates three months ago.
* Taiwan's benchmark stock index, which is up about 13 percent this year, is expected to fall to 10,000 by the end of the year, down nearly 4 percent from Wednesday's close.
* Japan remains the only major economy in the region which still has an ultra-loose monetary policy. But the Nikkei is only expected to rise another 3 percent by end-year.
* Australian shares will edge up over the remainder of the year but India's benchmark BSE Sensex will reach a record high, the latest poll shows. - Reuters
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