According to a recent survey by BofA, investors anticipate modest yet positive returns from Asian equities outside Japan over the next 12 months. The survey, conducted in early May, revealed that a majority of fund managers expect returns ranging between 5% and 10% from Asian equities, excluding Japan, driven by growing optimism surrounding a potential Chinese economic rebound and stronger corporate earnings.
Key Points:
Chinese Economic Outlook: The survey highlighted a significant shift in sentiment, with 41% of respondents expecting the Chinese economy to strengthen over the next year, a substantial increase from the 10% recorded in February. This optimism follows a remarkable recovery in Chinese equities since hitting multi-year lows earlier in the year, supported by government measures to bolster local stocks and the property market.
Sector Preferences: Fund managers expressed strong confidence in semiconductor stocks, as well as the broader technology and industrials sectors, foreseeing significant gains driven by robust earnings growth. Conversely, they showed aversion towards utilities and real estate.
Regional Picks: Taiwan and India emerged as top choices among regional markets, although interest in India appeared to wane compared to previous months. Conversely, fund managers remained cautious towards Thailand due to ongoing political instability, which deterred bargain hunting.
Japanese Market: Despite lagging behind regional equities in April, Japan remained the preferred market among fund managers. This preference persisted despite record highs in Japanese stocks during the first quarter, with many managers viewing the weak yen and the Bank of Japan’s monetary policies as key factors shaping the market’s trajectory.
Overall, the survey indicates cautious optimism among fund managers regarding Asian equities, with a focus on specific sectors and markets expected to drive gains over the coming months.