Asia Stocks Set to Outperform in 2H20, Says Credit Suisse

Since China reopened its economy, Asia stocks excluded Japan are set to outperform other emerging economies in the second half of 2020, supported by a weakening U.S. dollar, improving economic data and monetary policy support, regarding Credit Suisse Group AG.

 

“If there is any region that stands to benefit from the beginning of the resumption of normal activities in the world economy, Asia stands out because of its export dependence,” said Ray Farris, the bank’s chief investment officer for South Asia. Moreover, Asian economies are also able to perform better on easing monetary conditions and increase domestic liquidity among other regions where the currencies are “under a lot more pressure,” he added.

 

Asian economies are expected to recover firstly among other regions after showing a decline in coronavirus cases rate and consumer spending rebounded. Positivity signs emerged as Chineses consumer demand and industrial output revived, as well as easing shipment declines in South Korea in June. The regional stock benchmark is about 5% points away from erasing losses for the year, outpacing the rebound of its emerging market counterpart.

 

Credit Suisse also pointed out that the further weakening of the U.S. dollar and expectations of low interest rates in the U.S. through 2022 will support strengthening of Asian currencies. 

If the dollar weakens further and “these markets begin to perform, then foreign money will return as well, chasing the returns in the domestic market and the currency,” Farris added.

 

In addition, Credit Suisse has made the bank’s recommendations for Asian equities in the second half of the year as follows:

 

1) “Outperform” weighting on Taiwan because of technology hardware-related companies.

2) Prefers Hong Kong and Indonesia on valuations; “Indonesia is about an economy that has been beaten down a bit and should, especially at a consumer level, recover in the second half of the year,” Farris said.

3) “Underperform” weighting on India and Malaysia.

4) Expects Singapore equities to perform in line with regional markets as the slow recovery and the impact of low interest rates offset “attractive” valuation of the market.

5) Bank is maintaining a small overweight in equities in its overall investment strategy.