Bonds, currencies and shares of Asian emerging markets which can be less depending on external demand, similar to India and Indonesia, will probably be the preferred alternative for investors and strategists next yr. South Korea is seen as a market to avoid amid concerns that US President Donald Trump will damage global trade when he takes office next month.
Currencies:
- Masakatsu Fukaya, a Tokyo-based emerging markets broker of Mizuho Bank Ltd., likes the Indian rupiah and the Indonesian rupiah. “India is the perfect alternative as a consequence of good fundamentals, room for further rate of interest cuts and better yields, all of which create good conditions for attracting fund inflows,” he said. It is most bearish towards the Chinese yuan, followed by South Korea’s win.
- BNP Paribas SA recommends buying the Indonesian rupiah as a consequence of the country’s higher yields and support from the commodity-based economy, Singapore-based head of foreign exchange and rate strategy for Asia Mirza Baig said at a press conference in Singapore earlier this month. In a press release issued earlier this month, Eastspring Investments said it also sees opportunities to take a position within the rupee and Indian rupee.
- Morgan Stanley and Societe Generale SA said they’re bearish in 2017. Currencies sensitive to Trump’s policies are expected to underperform amid weakening risk sentiment, SocGen said in its 2017 emerging markets outlook note earlier this month.
- In a note dated December 14, Credit Agricole CIB said it expected the yuan to depreciate further as a consequence of China’s “significant” balance of payments deficit. The lender forecasts the currency will end 2017 at 7.25 per dollar, greater than 4 percent weaker than current levels.
Bonds:
- HSBC Global Asset Management favors Indonesian local currency government bonds because they provide good value after the recent sell-off, Binqi Liu, a money manager in London, said in an email. “In an environment of lack of global demand, high uncertainty about global trade dynamics and the risk of slowing growth in China, Indonesia is in a better position than its Asian peers,” Liu said.
- Western Asset Management Co. favors local bonds of India and Indonesia, while Indonesia is included in Morgan Stanley’s sovereign credit trading suggestion for 2017. Pioneer Investment Management maintains “chubby” positions in India and Indonesia notes as a consequence of the reform processes of each countries, improving economic growth and comparatively high returns, Hakan Aksoy, a London-based emerging markets fund manager, said in an email.
- Global funds have pumped $7.64 billion into Indonesian sovereign debt this yr, while selling a net $6.84 billion value of Indian securities, in response to data compiled by Bloomberg.
Stocks:
- IG Asia favors Indonesian, Indian and Philippine stocks. Amid weak growth and unsure trade conditions in 2017, economies with strong domestic fundamentals appear “probably the most promising,” said Jingyi Pan, a market strategist in Singapore. “Any declines near the 5,000 level would represent a good entry” into the Jakarta Composite Index, she said. CLSA Ltd. and BNP Paribas also like Indian stocks for 2017.
- South Korea is among the many markets where IG Asia has an unfavorable stance as a consequence of slower growth and trade and political uncertainty, Pan said.
- Credit Suisse Group AG is positive on China, Korea and Indonesia as a consequence of improving macroeconomic environment, balance sheets, valuations and underexposure of world funds.
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