Asian equities in focus
Attractive valuations, rising earnings and better fundamentals should support future gains.
Japanese equities have remained range-bound in 2017, with only a modest pick up over the last month.
By comparison, Asian ex-Japan equities have continued to beat global benchmarks. Positive earnings growth, stable commodity prices and regional export growth have all helped – as has good news from China.
So what’s holding Japanese equities back? Part of the reason is a resilient JPY. This has shown a negative correlation with the Japanese equity market in recent years. But the Bank of Japan’s continued accommodative policy, set against further Fed rate rises, could soon the JPY back again .
Several other factors should be positive for Japanese equities, including improving earnings and low rates of unemployment. Japanese price/earnings valuations also remain lower than those in the US and core Europe.
Source: Thomson Reuters Datastream, Deutsche Bank Wealth Management. Data as of March 22, 2017.
Chief Investment Officer APAC
Deutsche Bank Wealth Management