Barings predicts surprises from Asian markets

As the credit crunch impacts markets globally and the US and Europe experience economic slowdown, Baring Asset Management (Barings) argues there is room for positive surprises in global markets in 2009. At a press conference held on January 14 in the Landmark, Central, Khiem Do, Head of Asian Multi-Asset and Henry Chan, Head of Asian Equities at Barings, highlighted that investors should look to cheap and under owned growth assets for returns in 2009.

Khiem Do comments: “Given that a global recession in 2009 is already priced into markets and only a mild global economic recovery is expected in 2010, we believe that investors will look to growth assets going forward. Although these investments collapsed in 2008 they are now deemed cheap and under owned in comparison to the ‘safe’ assets that people relied on last year. Global reflation and US dollar weakness is likely to spark interest in Asian, Emerging Market equities and commodities again.”

According to Barings, equity markets are likely to witness a change of leadership in sectors from “defensives” in 2008 to “cyclicals” in 2009.

Khiem Do continues: “The panic and fear induced selling appears to be over and we expect investors to focus on assets with cheap valuations and future growth potential. The best ‘growth’ assets are likely to include selective corporate bonds, Chinese equities, selective other Asian / Emerging Markets equities and selective commodities.”

Also speaking at the press conference, Henry Chan commented on the outlook for Asian markets following last year’s short-term setback. Barings argues that following the Asia Financial Crisis in 1997 the market transformed itself, offering more sustainable growth in the long term, and Barings predicts a similar outcome following the recent selloff.

Henry Chan comments, “Although the global financial tsunami has caused a sell-off in Asian markets, we believe Asia will be a long term winner. In the short-term we will see downward revisions on macro data and corporate earnings, cautious bank lending and depressed risk appetite and valuations are in line with developed markets despite growth prospects. In the longer term however, the secular domestic demand growth story remains intact, Asian economies and consumers are under-leveraged and in absolute terms Asian market valuations remain attractive.”