Asia’s bulls have legs

The Asian crisis of 20 years is ancient history as the region's markets enjoy their day in the sun.

863-China-bull-634
There's no stopping the China bull

Twenty years on from the Asian crisis, "Asia bulls are enjoying a day in the sun", says Pete Sweeney on Breakingviews. The MSCI Asia ex-Japan index has risen to near ten-year highs, while most regional currencies have gained ground against the dollar this year. One reason for confidence is that "there has been no hard landing" in China, the regional heavyweight. For now, at least, the authorities have managed to keep growth ticking over and reduce capital flight, shadow banking and speculation. At the same time, they have allowed more foreign capital into the country's stock and bond markets.

The recent acceleration in developed-market economies and solid consumption growth at home have both contributed to an improving earnings outlook for regional stocks. After several years of flat or slightly negative profit growth, Asia ex-Japan earnings are now expected to rise by around 13% in 2017, as Manishi Raychaudhuri of BNP Paribas points out on CNBC.com.

It also helps matters that the region, and emerging markets in general, look less vulnerable to the global tightening cycle than on previous occasions, says Capital Economics. High US interest rates draw money away from risky assets such as emerging markets because the yield on US assets rises, making them more appealing. But monetary tightening is proceeding incredibly slowly and global liquidity is still abundant. Asian current-account deficits have fallen in recent years, so they are less dependent on foreign capital, and foreign-currency-denominated debt is low, so Asia need not fear a slide in its currencies. Throw in valuations around the historical average, and there is scope for further gains.

Recommended

The Arab Spring ten years on: a revolution that failed to blossom
Global Economy

The Arab Spring ten years on: a revolution that failed to blossom

Ten years ago, the Arab world was rocked by mass protests and popular uprisings that ousted long-reviled dictators. For the most part, the end result …
23 Jan 2021
The charts that matter: inflation, bubbles, and booze
Economy

The charts that matter: inflation, bubbles, and booze

As US stocks head higher into bubble territory, John Stepek looks at the charts that matter most to the global economy.
23 Jan 2021
The MoneyWeek Podcast: let's talk about bubbles
Stockmarkets

The MoneyWeek Podcast: let's talk about bubbles

Merryn and John talk about the many obvious signs of a bubble in certain assets, including tech stocks, TikTok, and stock-trading 12-year olds. It's c…
22 Jan 2021
Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021
The world’s fund managers are getting very bullish – be careful out there
Stockmarkets

The world’s fund managers are getting very bullish – be careful out there

The latest survey of fund managers shows them to be extremely bullish on all the same things. And that, says John Stepek, means the market is in dange…
21 Jan 2021