THURSDAY, March 28, 2024
nationthailand

Citi bullish on Asia stocks, despite outflows, trade row

Citi bullish on Asia stocks, despite outflows, trade row

CITIBANK Thailand is confident on the prospects of Asian stocks in the second half of this year, despite the overhang of an intensifying global trade conflict and capital outflows.

“Citi analysts are overweight equities in Asian emerging markets, Europe and Japan, while we have a neutral view on US stocks,” Don Charnsupharindr, senior vice president at Citibank Thailand, said yesterday.
Citi forecasts growth in global earnings per share (EPS) of 13 per cent in 2018, which is supportive for global equities. 
 The Asia-Pacific will continue to benefit from the expansion in the global economy, estimated to reach 3.4 per cent this year – the highest mark in the past eight years, Don said.
There is a risk from a further escalation in the trade war, but that is unlikely to happen, he said of the conflict that has the United States at its centre. Political risk also creates uncertainty.
“The trade war will not have a significant impact on the growth of the global economy,” he said, referring to the most likely scenario projected by Citi.
While China and the US have been embroiled in a trade dispute, Japan and Europe have signed a free-trade agreement. This suggests global leaders still prefer free trade, Don said. 
Following recent capital outflows from emerging markets, the valuation of equities in Asia are attractive with a forward price-earnings ratio (P/E) of about 12-13 times, varying across markets, while in Thailand Malaysia the ratio is about 15-16 times, he said.
The capital outflows have been caused by the rising trend in US interest rates, worries over the trade war and a strengthening in the US dollar.
The dollar is expected to weaken in the next three to six months as US tax cuts and public spending would lead to a higher budget deficit that would adversely affect investor confidence, Don said.
He noted that the baht may reverse course after its recent weakening against the US dollar.
The baht could strengthen to about 32.85-32.50 to the dollar from the current level of slightly over 33. Don said he optimistic about Thailand’s economy, which is predicted to grow 4.2 per cent this year, with a low inflation rate of 1.4 per cent. He does not think the Bank of Thailand will raise its policy rate this year. 
Don said that Citi is highlighting cyclical stocks, including those in the energy, financial and information technology sectors.
“We particularly believe that tech stocks would perform well as the global trend is for technology,” he said, adding that although many countries have started to impose taxes on giant e-commerce and related tech giants, these actions would not hurt their performance. 
Citi also is confident on the prospects for alternative strategy and multi-asset solutions to reduce overall portfolio risk. In terms of bonds, Citi is overweight US investment grade debt and high-yield bonds.
Returns on investment may not be as much as those for last year, as some investment portfolios rose 40 per cent last year, but returns this year would remain positive, Don said.
 Chaikaseam Vadhanasiripong, chief distribution officer of Manulife Asset Management Thailand, said Manulife has partnered with Citibank Thailand to launch the Manulife Nextstep Fund Series. It has been designed as an “all-in-one investment solution” to serve Citibank’s clients who are seeking a multi-asset fund.
The fund series comprises three funds: Manulife NextStep Stable Growth FIF, Manulife NextStep Balanced Growth FIF and Manulife NextStep Dynamic Growth FIF. These are feeder funds investing in the units of the Franklin NextStep Series (the master fund), managed by Franklin Templeton Investments, one of the world’s biggest asset management companies.
 Investors’ money would be allocated to portfolios managed by other managers who are specialists in their own fields, not limited to only fund managers at Franklin Templeton, in order to take advantage of their expertise, Chaikaseam said.
 

nationthailand