A slowing pace of virus infections and optimism over China’s economic recovery is burnishing the appeal of Asian stocks for some money managers as volatility in global markets jumps ahead of next week’s U.S. vote.
GAM Investment Management, Robeco Hong Kong Ltd. and Nordea Investment Funds SA see regional shares extending October’s gains, regardless of who wins the election. The MSCI Asia Pacific Index has beaten the MSCI All-Country World Index by the most since 2008, thanks to a rally in Chinese technology stocks such as Tencent Holdings Ltd. and Alibaba Group Holding Ltd.
The daily new virus cases in Asia Pacific have fallen by about a third from a month ago while the U.S. and parts of Europe saw record increases in recent days. China’s economy has regained all the ground it lost in the first half, boosting prospects for the region’s growth. In contrast, Germany and France have gone back into lockdowns, sending European shares sharply lower.
“Asia has become a safe haven” as the pandemic has worsened in other regions, and China is recovering, said Jian Shi Cortesi, a fund manager at GAM in Zurich, which manages $131 billion in assets. “The two major factors that are driving the markets now, i.e. U.S. election uncertainties and pandemic lockdowns, tend to impact the U.S. and Europe more than Asia.”
The latest economic data from China show its recovery from the pandemic slump is broadening out, with stronger growth in manufacturing and consumer spending. Improving corporate earnings as well as China’s goal of becoming a technology powerhouse should offer fresh catalysts for traders in the nation’s stock market that is the calmest in more than four years.
“China’s recovery should lift the Asia region through economic links,” and will benefit South Korea and Taiwan the most, Cortesi said.
Joshua Crabb, a portfolio manager at Robeco, said Asian stocks will continue to outperform as “economies are starting to heal” from the virus-induced damage and valuations are cheap. Nordea Investment Strategist Sebastien Galy said his firm’s managers are positive primarily because China is recovering.
To be sure, harsher pandemic measures in Europe could damp the recovery prospects of some Asian economies that rely heavily on exports, such as China and Singapore.
- Read Bloomberg’s U.S. election guides for stocks in South Korea, Australia, Japan and India.
Robeco’s Crabb prefers cyclical sectors, especially those linked to the consumer. “Pent up demand has been building” and economies are reopening, he said.
— With assistance by Amanda Wang
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