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Asian equities will outperform global markets next year, according to Credit Suisse, as the region is expected to begin a “super profit cycle.”.
Swiss bank predicts 19% return in US dollars on the MSCI Asia index excluding Japan from now to the end of 2021, up from 15% globally.
«Asia, excluding Japan, is our largest leader in the world», – said on Thursday Dan Fineman, Co-Head of Equity Strategy Asia Pacific, Credit Suisse during a webinar discussing the bank’s 2021 outlook.
Fineman said earnings per share growth or EPS – a widely used metric for valuing a company – could be sustained. «in adolescence» for at least three to five years in the entire region. According to him, this will be due to the stabilization of economic growth and a decrease in tax pressure..
In addition, stronger exports and currency appreciation will also support Asian equities, which are still lacking in foreign portfolios, Fineman said..
Credit Suisse prefers South Korea among all Asian markets, predicting 43% EPS growth in 2021.
Fineman said Korean stocks are cheaper than their North Asian counterparts, and South Korea is home to major manufacturers of so-called DRAM chips, a tech segment that Credit Suisse likes..
DRAM stands for Dynamic Random Access Memory and is a type of semiconductor memory chips used in devices such as laptops and smartphones.
«If you look at the Korean market and the Korean economy, it is very cyclical. When you are expecting a global economic upturn, it’s time to visit Korea», – he explained.
Other Asian markets Credit Suisse likes:
- Hong Kong, which the bank says has «the best prospects in real estate» in the region and the lowest risk of political moves that could put pressure on the real estate market.
- Singapore, which has a lot of real estate and banking stocks, are two of the most popular sectors of Credit Suisse at the moment..
- China with favorable factors such as further strengthening of the RMB, stabilization of trade relations with the United States under the Biden chairmanship and recovery of incoming foreign direct investment.
- Thailand, which is «the best potential to improve the situation», especially in the second half of 2021.
In terms of sectors, Credit Suisse’s favorites are properties with signs of recovery in some markets, especially Hong Kong. Property purchases could gain momentum from the low short-term interest rates against which most mortgage loans in Asia are priced, Swiss bank said.
Bank shares in the region that were «very cheap», would also benefit from improved global economic growth, Fineman said. But Credit Suisse will close its positions in Asian banks once valuations reach the broader market, he added..
«I think there is still enough room for banks to work, even though they have shown the best results over the past month.», – he said.