Asia appears to be the only region showing positive economic growth, according to an analyst. He remains to be bullish on Asia.
As people wonder if it is too late to invest in stocks, the one bright spot, according to the co-head of asset allocation at UBS Global Wealth Management’s Chief Investment Office, Adrian Zuercher, is Asia.
“We are overweight Asian ex-Japan equities at this point,” said Zuercher during an interview on CNBC’s “Street Signs” on Wednesday.
“I think for us, that’s the only region that will have positive earnings growth this year and also next year, double digit earnings growth.”
A positive momentum
Zuercher’s remarks came as global markets experienced a strong rally in the past days. The developments had a positive momentum as countries gradually lift lockdown measures which damaged global economies.
When June began, the MSCI Asia ex-Japan index rose by 6.07%, based on the data from Refinitiv Eikon. However, reclaim earlier highs became difficult, with the index more than 8% lower on a year-to-date basis.
Meanwhile, Hong Kong’s Hang Seng index increased by 5.65% month-to-date while the Shanghai composite in mainland China got an additional 2.09%.
Both indexes suffered from losses of 13.94% and 4.53%, respectively, when 2020 started.
“I think we sort of passed ... the moment where we had this panic and … followed by this fiscal stimulus, monetary policy stimulus. And now we’re sort of in a repair mode of the economy," said Zuercher.
“I would say the market’s doing the right thing,” he said. “Things are improving, growth is improving.”
“As long as we’re sort of getting back on track in terms of reopening up the economy, I think that’ bes really the main driver of this market and that’s what the market will focus on and play on.”, Zuercher said.
However, he mentioned that a market “overshoot” is possible in the short-term, as several issues persist on the geopolitical front and there are “still speed bumps ahead” with growth “slowing down.”
Economic forecasts
Economic predictions for China was not that bright before.
In fact, the International Monetary Fund (IMF) said that due to the coronavirus, Asia’s economy is not likely to experience growth for the first time in 60 years.
“This is a crisis like no other. It is worse than the Global Financial Crisis, and Asia is not immune,” said Chang Yong Rhee, director of the Asia and Pacific Department at the IMF, in a blog post published on Wednesday.
“While there is huge uncertainty about 2020 growth prospects, and even more so about the 2021 outlook, the impact of the coronavirus on the region will — across the board — be severe and unprecedented,” he added.
Asia is considered to be one of the fastest-growing regions in the world. Before the coronavirus, the Asian financial crisis in 1997 and the global financial crisis in 2008-2009 did not deter Asia’s economy. It still recorded average growth rates of 1.3% and 4.7%, respectively, according to IMF.
Moreover, the IMF pointed out that the global economy may plunge by 3% this year. The economies of Asia’s largest trading partners may grapple with deep contractions: The U.S. is expected to fall by 5.9%, while the euro area in general may contract 7.5%.
