Asia stocks remain in a ‘genuine sweet area,’ strategist states

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Asia stocks are in a 'real sweet spot,' strategist says

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A Thai financier checks an electronic board revealing stock rates.

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SINGAPORE — Asia’s stock exchange are well placed to carry out “very well” in the coming year, a strategist informed CNBC today.

“The conditions for Asia at the moment are possibly the best you could have post a credit crunch,” stated Sean Darby, worldwide equities strategist at Jefferies. Markets and economies around the globe were hammered when Covid-19 broke out early this year.

Darby stated elements consisting of the weak dollar, soft oil rates and light financier placing in the area are favorable.

“We’re in a real sweet spot notwithstanding the U.S. politics with China,” he stated. “Generally, I suspect we’re going to be in for a period where profits and stock prices actually do very well in the next six to 12 months.”

Specifically, Southeast Asia might do much better in 2021, he included.

North Asia has a “fundamental advantage” due to the fact that it is extremely connected to the worldwide trade cycle, he stated. “China’s recovery (from the coronavirus) was so strong and so quick that it has lifted all boats in North Asia, but I would say … early next year, you could certainly see Southeast Asia outperforming.”

Southeast Asian markets have actually lagged as nations battle with the pandemic, with some indexes down more than 20% considering that the start of the year.

But Darby stated cash supply information for the area is “beginning to boom,” and numerous nations still use a sensible bring trade.

“Carry trade” is a method in which financiers obtain cash in a currency with low rate of interest in order to purchase possessions in a currency with greater rate of interest. That method, they can get returns from their financial investments in another currency while paying less interest on the funds obtained.

Tech financial investments

Separately, Darby stated investing in Asia’s tech sector is less dangerous than doing so in the U.S.

“I certainly think in the U.S., that we’ve reached a spot of euphoria in the tech space,” he stated. “And I think there, the dangers in the tech stocks are much greater than in Asia.”

Earlier in September, U.S. stocks fell dramatically, led by a sell-off in the tech sector.

“The tech stocks there tend to be more highly correlated to each other,” Darby stated. He included that the expense of hedging has actually increased significantly.

“I think the tech space here (in Asia) probably still has a pretty good tailwind going into the Christmas season,” he stated.

While more powerful regional currencies might impact export earnings, there are still less dangers in the Asian tech stocks compared to the U.S., Darby stated.

— CNBC’s Eustance Huang added to this report.

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