MANILA, Philippines - ATR Kim Eng Management expects the Asian equities to keep their strong performance this year.
According to Jun Tarrobago, vice president and equity portfolio manager for International Equities, the outlook for non-Japan Asian equity markets is positive, with potential returns of at least 20 percent as structural growth and balance sheet quality continue to make Asian stocks a magnet for liquidity inflows.
Given this scenario, he said the investment strategy is to “overweight” Asia with investments to Greater China and countries in the northern part of the region.
“Asian GDP growth is expected to decelerate from a high base, but toward a healthy and more sustainable rate of about 6 percent. This reflects a gradual departure from the old Asian growth model (investments-led) into a more consumer-led type of growth,” he said.
Also, tempered GDP and corporate earnings growth targets leave room for significant forecast upgrades.
“Valuations are below historical averages and far from bubble territory, in terms of both forward earnings (12x) and book value (1.7x). The strategy is to remain overweight, with meaningful upside seen in the financial, consumer, infrastructure and technology sectors,” added Tarrobago.
And while inflation risk is becoming significant, he said the situation is still manageable. “Asian central banks have in fact started monetary tightening as early as last year,” Tarrobago explained.
Nevertheless, there could be major challenges involving the policy makers’ ability to contain inflation and capital inflows, so as not to threaten financial stability.
“This may usher creative policy responses, with interest rate hikes more pronounced in Latin America and Eastern Europe,” he said.
In 2010, ATR KimEng Asset Management launched the Asia Plus Recovery Fund with the aim of democratizing investments beyond the Philippines, primarily in Asia. It employs the multi-manager approach, investing in selected funds and listed stocks. The fund has returns of 12.44 percent as of Feb. 3.
The AsiaPlus Recovery Fund is ideal for investors who are looking to diversify and take advantage of the strongest investment themes in Asia and other overseas markets. The fund is suited for investors pursuing a growth strategy and who have a medium to long-term investment horizon. It offers investors access to international stocks through an investment vehicle, which is registered with the Securities and Exchange Commission.