Tokyo: Asian stocks may rebound in the second half as the region withstands the European debt crisis and a weakening of the recovery in the US, according to Bank Julius Baer & Co.
Asian stocks will gain "as the US recovery halo fades and the euro zone continues to battle with sentiment and negative headline drag," Venkatraman Anantha-Nageswaran, who helps manage about $140 billion as chief investment officer at Julius Baer, said in a speech yesterday to investors in Singapore.
The European debt crisis has dampened commodity and energy prices, giving Asian nations "breathing" room on interest rates, he said. Central banks in Thailand, South Korea, the Philippines and Indonesia have left rates unchanged this month.
The decline in shares also means Asia is now in a "very comfortable valuation zone." The MSCI Asia Pacific Index has fallen 10 per cent since the end of March, set for its first quarterly decline in more than a year.
The drop dragged valuations to 14 times estimated earnings, down from 24 times a year ago. The Standard & Poor's 500 Index has a multiple of 13.4 times while the Stoxx Europe 600 Index is valued at 11 times.
Concern that Europe's sovereign-debt crisis may spread sent the euro to a four-year low against the dollar on June 7 and has wiped out more than $4 trillion from global stock markets this year. Europe's debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.
Euro
Investors must still grapple with the risk of social unrest within indebted nations including Italy and Spain over the next two months as governments seek to cut spending and reduce their deficits, Anantha-Nageswaran said. He expects the euro to remain weak for "some time" against the dollar.
The "better" balance sheets and a comparatively stronger growth outlook in Asia mean that the region's stock markets deserve to trade at higher valuations, the investor said.
China said Thursday its May exports jumped the most in six years and property prices rose at a near-record pace, adding to signs that Europe's widening deficits haven't slowed the Asian nation's economy. The benchmark Shanghai Composite Index has fallen 21 per cent this year, the worst performer in Asia.
"No other place is safer than China in this decade," Liu Yang, chairwoman of Atlantis Investment Management Ltd.
