According to an investment strategist from Citi Private Bank, Asian markets are rated higher than the US, Japan and China as the top picks.
Inflation is milder than in the US and central banks in Asia are not as worried as the Federal Reserve, said Ken Peng, the bank’s head of Asia investment strategy.
Citi recently added its asset allocation to Japan and China, Peng tells CNBC’s “Asian street signs” on Friday.
“These two are our top picks for the region,” he said.
Peng said Japan is the “cheapest among developed markets” and below the country’s historical average.
Income growth in Japan is “quite strong” and the price-to-earnings ratio is falling as prices fall and incomes rise, he said.
He said the fact that the yen could weaken as the yield differential between the US and Japan becomes increasingly “mildly positive” is also a “mild positive”. A weaker currency is good for exports, as it makes products sold abroad cheaper and therefore more competitive.
Mr. Peng added that global investors are more interested in Japanese stocks because of improvements in corporate governance and the country remains an important part of the global supply chain for technology. .
“Because of this set of interesting points, and at a time when America is becoming more wobbly, you will see more capital flows to Japan – and that is why we are relatively positive,” he said. than there”.
Meanwhile, China is likely to get some easing on both monetary and fiscal policy, Peng said.
The The Federal Reserve has signaled that it is ready to raise interest rates and the era of easy money is coming to an end. On the other hand, in recent weeks China has interest rate cut in an attempt to boost its economy.
“On the Chinese side, there is potential for policies that are open enough to narrow the credit gap,” Peng said.
When interest rates in China fall, bond prices tend to rise. And while interest rates in the U.S. rise, bond prices are likely to fall, providing an opportunity for China to outperform.
“What we expect is China to become a kind of [an] alpha opportunity this year in the high-yield fixed-income space,” he added.
