A recovering US appetite for Asian exports, strengthening Asian corporate earnings and resilient consumer spending will all contribute to another positive year for Asian equities, says fund management company,
BlackRock.
BlackRock says 2009 was a positive story for domestic consumption in Asia, but believes 2010 will be a positive story for exports. This will be aided by the gradual US recovery, combined with the US government maintaining loose monetary policy.
Consumption remains resilient in China and India and government spending will also continue to stimulate growth. In addition, Asian corporate balance sheets are strong and many have delayed capital expenditure.
Although the outlook for Asian Equities in 2010 is good, BlackRock warns that investment returns are unlikely to match those of 2009 and will be driven by strengthening corporate earnings rather than expanded valuations. China continues to dominate the region. The Chinese government retains a greater ability to encourage recovery than most other countries and has reiterated a commitment to growth.
"The sweet spot of rapid economic recovery with no negative policy response has passed,” said Nick Scott, CIO of Asian equities for BlackRock
“Strong corporate earnings growth will compete with tighter fiscal and monetary policy across the Asian region. With recovering exports and robust domestic consumption, the Asian economic cycle appears strong enough to contend with equilibrium interest rates and higher inflation. Tactical positioning will be vital in 2010 given excessive fears over monetary tightening."
“We favour consumer discretionary companies, but stock selection is paramount because this is an increasingly crowded area as investors across the world appreciate the strength of the Chinese consumer.
“The Chinese authorities are awake to the possibility of bubbles and are likely to take marginal measures to combat this, however in the short-term they are not likely to impose any change which could de-rail economic recovery."
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