Abrdn has shifted its view on emerging market equities to modestly positive on the back of Chinese policy easing, the firm said in its fourth-quarter outlook.
“There has been a step change in the extent of Chinese policy easing which could lead to a significant repricing higher of Chinese equities. However, sustained support will be required to offset structural headwinds from real estate,” it said.
Over the weekend, China’s Minister of Finance Lan Fo’an pledged to issue more debt to help local governments and prop up the ailing property market, although it was thin on details.
Stocks in China plunged last week having rallied sharply earlier amid concerns that the stimulus efforts would be insufficient to help revive the country’s growth.
With regards to equities, Abrdn also noted that the recent earnings season had witnessed a broadening out of earnings growth to cyclical sectors, which should support prices overall.
With regards to fixed income, Abrdn remains positive on duration, which is reflected in its overweight to global government bonds and emerging market local currency debt.
However, given the rally in duration markets and risks of a Trump presidency stoking a rise in the US dollar, its conviction on emerging market local debt was lowered.
“With interest rates having moved over the last quarter it could be that duration is a tactical neutral at this point. But with recession risks elevated over the House View’s 12 to 18-month horizon, it is sensible to hold some duration,” it said.
Abrdn has also upgraded its view on direct global real estate to positive and finds opportunities in geographies like the UK and Europe.
The UK-headquartered asset manager noted that there had been a deep valuation correction across global real estate markets, which was now likely completed.
