In an outlook report for the last quarter of the year, Ayaz Ebrahim, chief investment offcier, Asia ex- Japan equities, said Amundi prefers consumer discretionary, consumer staples, financials and information technology.
Some of the sectors in which the fund house has an underweight view are energy, real estate, materials, telecommunication services and utilities.
Over the next one year, Ebrahim expect Asian companies to report an aggregated earnings growth of 10-12%, excluding those in Singapore and Hong Kong.
Country Positioning
China, Korea, India and Thailand are some of its overweight calls, even as Amundi has an underweight view in the Hong Kong, Singapore, Malaysia and Indonesian markets.
The fund house believes the much talked about fears of hard landing in China are “overdone” and the second largest economy looks poised to achieve GDP growth of 7-7.5% as the government takes reform measures. In the long term, however, China’s growth rate could be 6%.
Thailand was also a preferred market. Transportation and infrastructure companies are worthwhile due to the government’s plans to increase infrastructure spending. Strong domestic consumption, an improved economy and decreasing inflation, as well as foreign direct investment, augurs well for travel and infrastructure companies, the firm said.
Hong Kong protests
The ongoing demonstrations in Hong Kong by pro-democracy protestors will have no major impact on the markets, Ebrahim said.
“Hong Kong is a major financial center, business operations remain normal and we have not seen any major capital outflow. We remain confident on the Hong Kong market,” he added.
If the protests last for more than one month, they could have an adverse 0.3% impact on the country’s GDP over a one-year period. In case tensions escalate, retail and property sectors are seen as most vulnerable.
Asian corporate bonds attractive
Raymond Lim, head of Asian bonds, said interest rates are likely to rise gradually due to low inflation globally. The US is expected to start raising rates by mid-2015, and Europe and Japan are likely to keep interest rates low in 2015-2016. Any rate hikes in Europe and Japan are expected to begin only in 2017.
In such a scenario, Asian corporate bonds offer an attractive spread over US and European credits, the firm said.
On government bonds, Amundi likes Korean sovereign issues as compared with the benchmark as it expects the central bank to cut rates again by the end of 2015 due to weak household consumption.
The fund house has a short call on Malaysian bonds because the country’s central bank is likely to resort to tightening measures.
In currencies, Amundi is overweight the Malaysain ringgit, Indonesian rupiah and Indian rupee on the back of supportive monetary policy and stable external balances. The firm is underweight the Korean won, the Philippine peso and Singapore dollar.
