HEAD-TO-HEAD: Allianz versus JP Morgan

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Claire Liang, Morningstar

Introduction

Apac equities should deliver moderately positive returns in 2022, after a year of heavy underperformance in 2021, Credit Suisse said in a research report recently.

2021 was a year to forget, with Apac markets falling 2% and underperforming global equities by 18%, but the investment bank expects Asia to perform better in 2022.

“The price-earnings de-rating should end, allowing the full benefits of strong earnings per share (EPS) to flow through. Asia tends to outperform on the upside in advance of Fed rate hikes, which we expect to begin in the fourth quarter of 2022,” Dan Fineman, said in the report.

Reduced oil price pressures should help. Valuations relative to global equities are very cheap, while the convergence of fiscal and monetary policies with western develop markets should boost the relative performance.

Although a neutral reading on Credit Suisse tactical indicators and a middling outlook for EPS revisions temper its enthusiasm, a target of 8% upside or MSCI Apac should be achievable.

Credit Suisse’s asset allocation favours markets with strong cyclical positioning, high sensitivity to inflation and discounted multiples. Asean ranks high on cyclicality and valuations and is the investment bank’s highest conviction overweight.

The firm also likes Singapore and Korea for their sensitivity to higher inflation and sees upside for Korea from a recovery in demand for dynamic random-access memory after the first quarter. Credit Suisse is less keen on markets such as China and Taiwan that have already enjoyed a post-Covid normalisation of growth.

Meanwhile, Fineman has upgraded Japan from underweight to market weight because of cheap valuations and expected EPS gains from a stronger dollar.

Against this background, FSA asked Claire Liang, senior manager research analyst at Morningstar, to select two Apac equity products for comparison: the Allianz Oriental Income Fund and the JP Morgan Pacific Equity Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 13 December 2021)

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