Asian Stocks to Outperform, Credit Suisse Poll Shows
(Corrects name of investor conference in third paragraph of story published on March 20.)
Stocks in Asia (MXAPJ) and the U.S. are expected to provide “the greatest upside” for investors in 2012 amid optimism economic growth in the two regions will bolster corporate earnings, according to a survey of delegates attending a Credit Suisse Group AG conference in Hong Kong.
Thirty-eight percent voted for equities in non-Japan Asia to outperform the rest of the world in the poll, while 35 percent chose the U.S., according to a slide presentation of the survey results obtained by Bloomberg News today. China was the Asia-Pacific country that the poll’s 300 respondents were most overweight, or held more shares than are represented on benchmark indexes for the region.
“People were quite optimistic about growth in the U.S. and non-Japan Asia is one of those areas that has given more growth consistently over the past five years,” Jahanzeb Naseer, the investment bank’s head of research product for the Asia Pacific, said on the sidelines of the Credit Suisse Asian Investment Conference. Asia “is the region that people think will continue to surprise on the upside in terms of growth,” he said.
The World Bank predicted in January the U.S. economy will grow 2.2 percent this year, faster than 2011’s estimated 1.7 percent. East Asian and Pacific economies may expand 7.8 percent this year, outpacing the World Bank’s estimate for global growth of 2.5 percent, the Washington-based institution said in a report released in the U.S. on Jan. 17.
The U.S. economy expanded at a 3 percent annual pace in the last three months of 2011, the fastest since the second quarter of 2010. Federal Reserve policy makers raised their assessment of the world’s largest economy on March 13 as the labor market gathered strength. The Standard & Poor’s 500 Index gained 2.8 percent since then, driving valuations to 13.5 times estimated profit, the highest level since July 7.
The benchmark gauge of American equity has climbed 10 percent this year, while the MSCI Asia Pacific excluding Japan Index has risen 14 percent. The Asian gauge trades for 12 times estimated profit, the biggest discount versus the S&P 500 since Jan. 16, according to data compiled by Bloomberg.
Asian equities may rise 10 percent or more this year from current levels, said 51 percent of the poll’s respondents. Forty percent of those surveyed said Europe’s debt crisis posed the biggest risk for investors in 2012, the results showed.
Thirty-three percent of the respondents to the poll said the so-called H shares of Chinese companies traded in Hong Kong were their biggest overweight position even after China’s Premier Wen Jiabao announced on March 5 a slower growth target for the world’s largest economy this year.
The 7.5 percent goal, down from an 8 percent objective in place since 2005, was announced in a speech by Wen at the start of a national lawmakers congress. The premier also reiterated that the government will maintain a “proactive” fiscal policy and a “prudent” monetary policy.
“Despite all the concerns, that’s one market where people are hopeful of surprise on the upside and that’s coming primarily from the view that China (HSCEI) is one government that has the flexibility, the tools and ammunition to ease monetary policy,” Credit Suisse’s Naseer said.
Forty-six percent of respondents in Credit Suisse’s poll last year predicted Chinese stocks would lead advances by Asian equities in 2011. The Hang Seng China Enterprises Index, which tracks H shares, slumped 22 percent last year as the Chinese government raised interest rates and banks’ reserve ratios to curb inflation and to prevent a property bubble. MSCI’s Asia excluding Japan index sank 18 percent.
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