Asia ex-Japan equities still provides opportunities: PineBridge

PETALING JAYA: US protectionism will not quash opportunities in Asia ex-Japan equities, according to PineBridge Asia Equities.
It said uncertainties abound on the final outcome of US taxation policy and on the Trump administration’s stance toward China with respect to tariffs.
“They will likely take some time to be dispelled, and the potential for a negative feedback loop back into the US also complicates matters. Yet we believe that the Asia ex-Japan equity market in general, and many Asia-based companies in particular, stand out as providing attractive opportunities for investors no matter how these policies unfold in the US,” it said in a report.
It added that some reforms could be revealed to have unintended consequences. The proposed border-adjustment tax (BAT) for example, could actually reduce consumer spending instead of creating jobs.
Suppliers in Asia are heavily embedded into global supply chains and there are very few, if any, alternative suppliers with the necessary scale and technological edge in the supply chain, said the firm.
With or without the trade issues brewing in the US, it sees a window of opportunity to invest in Asia ex-Japan equities as the earnings cycle picks up from its trough, due to global cyclical growth and long-term secular growth across the region.
“On average, fund managers are taking a cautious stance, and are poised to buy on market weakness. At the same time, the Asia ex-Japan equity market is trading at a significant discount to developed market equities despite a strengthening fundamental picture,” said PineBridge.
It views the Asian equity markets as attractive as an asset class within emerging markets. Asia ex-Japan equities, particularly small and midcaps, offer unique plays on innovative, technology-driven companies with strong management teams and healthy financial positions.
“However, to find the best opportunities and avoid the weaker ones, investors will need to employ strong bottom-up research and selectivity. Asia ex-Japan’s size and diversity mean investors need to have local teams and processes in place that help them recognise which companies are the best at what they do and, simultaneously, are best positioned to capitalise on their strengths,” said PineBridge.