Bullish on China, cautious regionally

Bullish on China, cautious regionally

By Peter Sartori, head of Asian Equity, Nikko AM Asia

The MSCI AC Asia ex-Japan returned 7.2% in April after shrugging off initial weakness and outperformed the MSCI AC World by 2.3% in April in USD terms.

H-share stocks got a liquidity boost as China moved to widen eligibility criteria for mainland investors. The People’s Bank of China (PBoC) continued easing efforts by injecting USD 80bn into major policy banks. These efforts initiatives helped bring interbank rates down sharply over the month with the SHIBOR 3-month rate decreasing from 4.9% to 4.0%.

China was the best performing market and continued to outperform in April. Hong Kong was the second best performing market. Indonesia was the worst-performing market, followed by India and Philippines.

Performance was mixed across the rest of Asia.

Asia ex-Japan markets are expected to continue to do well in the near term. Political developments and slowing growth keep us cautious on ASEAN with only a few selective positions across Indonesia, Philippines and Thailand. Our positive stance towards the two giant economies, China and India, is attributed to the reforms of the respective government.

In the North Asia region, we remain underweight in Hong Kong due to its increasingly reliant on China’s benevolence. We continue to be positive on Taiwan and Korea with a number of fundamentally attractive investment ideas and stronger Korean won respectively.

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