Asia good bet for long term investment, says HSBC

Dubai: Despite volatility in the past few years and, especially so in the last few months since the US Fed’s hint on tapering, which was pushed back last month, Asian markets still offer great opportunities for the long term, according to British bank HSBC’s local heads of wealth development and wholesale asset management.

That holds true for both equities and fixed income markets of Asia when compared to western markets that have seen anaemic recovery.

“We are at the moment very bullish on Asia, obviously compared to western world,” said Daniel Rudd, head of Middle East and Africa, wholesale, HSBC Global Asset Management. “The fundamentals in Asia are still there and Asia is all about long-term investment.”

Rudd alluded to strong GDP numbers which are supportive of markets and attractive valuations, though earnings recovery is not reflected yet.

“For Asia excluding Japan, corporate earnings per share [EPS] is still undervalued to what the market is actually showing,” said Rudd during a media roundtable in Dubai yesterday. “So we still got a lot of return on the upside from the corporate part in the equity market compared to the European market, [for example].

Asian equities on a valuation basis are attractive.

“Equities are trading cheap when compared to western markets, on a PE basis,” said Rudd. “They are trading below the 10 year average.”

Also, he said, equity dividend yields are still comparable to what the investors are getting in western markets and that’s a good sign.

Defensive stocks have been reasonably priced into the market and at the moment they are trading at 1.3 times the market but there are still opportunities there, he said.

“Cyclical and financials are still trading below market expectations and as fund managers we are seeing lot of opportunities in those sectors,” added Rudd.

A well diversified bond market in Asia also offers opportunities for diversification.

“It’s deep, it’s liquid, across investment grade and across high yield and also sovereign,” said Rudd, adding it’s a maturing market.