Whenever Asia ex Japan markets trade between 0.9 and 1.4 times price-to-book, investors have subsequently benefited from strong markets for 80-90% of the following 12 or 36 months according to Swan, head of Asian Equities and manager of the BlackRock Asia Fund and BlackRock Asia Special Situations Fund.
This trend goes back 40 years, and as Asia ex Japan are currently trading around 1.2 times price-to-book, now is a compelling time to invest as the markets are starting to recover from January’s lows, said Swan.
Moreover, the recent weakening of the dollar gives Asia space to implement the right mix of monetary and fiscal policy to bolster growth, noted the portfolio manager. BlackRock still sees value in China, mainly in growth companies within the e-commerce space, value stocks and energy companies post the recent fall in the oil price.
In India, where the asset manager believes fears are overplayed, it likes autos and telecoms. The firm is also positive on the Indonesian market, “where growth resilience and a renewed commitment to reform can help extend its recent recovery,” in Swan’s view.
BlackRock’s risk team has found that quality stocks are at 15-year valuation highs, while the reverse is true for value stocks. Korea and Malaysia still have a number of structural issues to resolve, highlighting that selectivity is crucial both at a stock and country level, Swan noted.
Overall, BlackRock expects growth in the region to pick up over the next six months. “With valuations where they are, we expect to see further upside,” Swan said.