SINGAPORE – The best time to buy Asian stocks could be now, a JPMorgan strategist said Wednesday.
Mixo Das, Asia equity strategist at the bank, said US markets had hit record highs while Europe and Japan were nearing all-time highs. However, the Asian markets have not seen the same trend.
“We’ve been down quite a bit in Asian stocks since the highs in February and the way we look at it, our framework tells us that now is probably the best time to take risk in Asia,” he told CNBC. Squawk Box Asia. “
That said, investor positioning in Asia is currently “extreme, extremely low” while valuations have fallen to more normal levels. If macro dynamics in the region begin to stabilize, Asian stocks could rise significantly, he added.
The strategist said Asian corporate earnings could increase 60% to 70% year over year in the second quarter – largely in line with estimates.
Covid and vaccination effects
Parts of Asia like South Korea, Indonesia and Malaysia are grappling with spikes in Covid-19 infections at a time when vaccination advances are lagging behind countries like the US and UK
That said investors have become used to seeing new waves of Covid cases. He cited the example of India, where a “catastrophic wave of infections” earlier this year did not rock the stock market because investors understood that the country’s long-term fundamentals were likely to remain intact.
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But the spread of a more transmissible delta variant and relatively low vaccination rates across Asia could weigh on stocks that would benefit from an economic reopening, Das said. Those stocks include those in the hospitality, leisure and travel sectors, he said.
The strategist added that JPMorgan favors stocks that respond to changes in interest rates, such as banks. His comments come as the US Federal Reserve raised its inflation expectations and brought forward the timeframe for a rate hike.
Chinese technology stocks
Speaking of opportunities in China, Das said technology stocks are still a “buy” for investors with a long-term horizon. He said that Chinese tech companies still have growth prospects, even if the pace of growth may slow due to tighter regulatory scrutiny from Beijing.
Shares in large Chinese internet companies like Tencent and Alibaba were hit when Beijing restricted monopolized business practices and regulated the collection and use of data.
“If you look at the valuation of these names against benchmarks around the world, it’s ridiculously cheap right now,” Das said, without naming specific Chinese technology stocks.
“We see incoming inquiries from long-term, patient investors looking at these names and wondering if this story will be played out in five, 10, 15 years. And most of the time the answer is yes.”