Two from ValueWalk:
As this is written, political developments in India raise hopes for a stable government after the 2014 general elections. The country’s BJP party put up a strong showing in state elections, fueling expectations that stock indices would touch a new high.
China’s upbeat economic data
Meanwhile, China reported that its trade surplus rose to the highest level in nearly five years in November, climbing to $33.8B from $31.1B in October and handily beating consensus estimates of $21.7B. Exports were up 12.7% on the year compared to +5.6% in October, and blew past forecasts of +7.1%. Imports grew 5.3% against +7.6% and consensus of +7.2%.
Asian markets trade firm
The Nikkei 225 Index is trading up +1.87%, Hang Seng +0.30%, Kospi +1.02% and the SSE (-0.09%). Asian markets appear to be in the mood to shrug off the ‘taper’ bogey after the US declared strong GDP and employment numbers last week. Asia seems to be gearing up to put the 2013 doldrums behind and regain investor confidence going into 2014.
What are analysts thinking?
The research team at Citi comprising of Markus Rosgen and Yue Hin Pong assess valuations in Asia in their research report “Pan-Asia Road Ahead: 2014 Outlook” of December 3, 2013.
Asia: Perverse to be pessimistic
“During what has been the longest period of de-rating in 40 years, trailing P/E for Asia ex-Japan has swooned from a peak of 25x to the current 12.6x,” says analyst Markus Rosgen. “Asian equities have so little allure, are so under-owned, that it would be perverse to be pessimistic about future performance,” he argues.
“With the exceptions of the period post the 1987 crash and the bursting of the 2000 tech bubble, Asia-ex has not traded below historic average valuations for this length of time,” point out Citi.Also at ValueWalk:
In fact, the analysts put forth a contrarian view, saying that implicit in the US ‘taper’ would be “the signal that US and global growth had found a firmer footing” – a boon for those Asia’s export-oriented economies that have current account surpluses.
Expect ~20% upside from Asia
The Citi analysts point out that valuations are currently 0.5 to 1.0 SD below mean, implying that the chances of positive returns during 2014 are bright. Within Asia, the Citi analysts prefer north Asia to the ASEAN countries because of the former’s higher linkages with global growth. Moreover the ASEAN countries have a higher component of current account deficits....MORE
Japan Autos Could Be Winners As Valuations Near Record Lows: CitiA year ago I was typing: "Japan's Nikkei is In the Early Stages of an Historic Move".
A month after that it was No typo: Analyst sets Nikkei 63 million target" (it's Société Générale's Dylan Grice).
And two weeks later I was quoting Shakespeare:
While You Were Sleeping: Nikkei Up 2.28% Overnight
...There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures....
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures....
We're going higher.
