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QS Investors see Asia exporters gaining

Asian markets and particularly China's export-oriented businesses stand to benefit from the improvement of the US economy, according to QS Investors, a wholly owned affiliate of Legg Mason.
The recent S&P rally and the impending interest rate hike are signs that the US economy is growing at an above trend rate, and the unwinding of quantitiatve easing and a rate hike in the first half of 2015 are already factored into equity values, said US-based portfolio manager Wayne Lin.
“This is generally a positive for Asian and emerging Asian markets because strong US growth creates global demand, which in turn leads to export-oriented sectors in Asia doing well. China would most likely benefit from increasing global demand.”
Still, the Asian and emerging Asian markets are vulnerable to shifts in rate hike expectations and the eventual withdrawal of huge amounts of liquidity provided by the US Federal Reserve.
“However, the Fed’s gradual approach and Janet Yellen’s dovish stance help to mitigate the risks of sharp market drawdowns in Asian/EM,” Lin added.
The vulnerability of emerging markets was evident last year when investors pulled capital out of the region after the US Federal Reserve sent a signal it would taper monetary stimulus, dragging down stocks and currencies.

India caution

On a separate note, Lin appeared cautious on the Indian markets, which have surged amid the euphoria over expected reforms in the country due to the clear mandate won by the Narendra Modi-led government.
“The Indian markets are at risk of short term consolidation due to their very rapid rise year to date,” said Lin.
The Bombay Stock Exchange’s 30-share Sensex has surged about 29% year to date.

Part of the Mark Allen Group.