What the Big Money Thinks About the Asian Equity Rally

Had you put your money in China this year, you would’ve left us all in the dust.

The Hang Seng Index is up more than 33% this year. House prices have climbed so high that the government has been forced to step up financial regulation.

Asian Stocks Headed for Record High

Safe to say, asset prices in China are on a tear.

Asian stocks are headed for another record high this month. As Bloomberg reports:

The MSCI Asia Pacific Index rose 0.6 percent to 172.67 as of 4:37 p.m. in Hong Kong. The gauge passed its 2007 closing high on an intraday basis on Nov. 9 but didn’t hold the level.

Japan’s Topix index climbed for a second day Wednesday, rising 0.3 percent, after its worst week in seven months.

Hong Kong’s benchmark Hang Seng Index breached the 30,000 level for the first time in a decade, boosted by China banks and energy stocks.

India’s S&P BSE Sensex added 0.4 percent, with foreign buying of the nation’s stocks so far this month on course to be the highest since March.

Asian stock market

Source: Bloomberg

Will the rally continue? Are those who missed out getting a second chance?

Goldman Sachs analyst, Tim Moe, believes earnings growth is behind the rally. Corporate profits will also push stocks higher in 2018, Moe said.

Macro growth should remain firm, driving a 14% rise in profits.

Head of research at Julius Baer Group, Mark Matthews, agrees with Joe. Matthews believes Asian markets will go up based on their correlation with US stocks. He told clients to expect more money to be allocated to China.

Momentum May Continue

Many big banks and strategists are in Moe and Matthews’s camp. Bloomberg continues:

As the 2018 market-strategy notes roll in from banks’ research teams, one call that stands out prominently is further gains in Asian equities, which have already this month hit record highs.

The thinking is that the region’s world-beating economic growth rates will be sufficient to keep up earnings momentum in a year that’s projected to feature a roll-back in monetary stimulus by the world’s main central banks.

Cheers,

Härje Ronngard,

Junior Analyst, Markets & Money

PS: Aussie property prices continue to defy gravity. Those who have tried to predict the top have been wrong thus far. And that’s because property prices still have a long runway of growth ahead.

If you want to read more about long-term booming property, check out our Markets & Money report, ‘Why Australian Property Is On The Verge Of A Decade Long Boom’.


Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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