If you compare the Asian stock market these days to prior years, it’s looking like “déjà vu” all over again, says Credit Suisse.
In one of its latest reports, Credit Suisse’s Asia Pacific Equity Research team compared this year’s daily price data of the MSCI All Country Asia ex-Japan Index to that from 2010 and 2012. What’s the common thread among these three years? Momentum of global growth bottomed each summer.
You can see below how today’s market is following a similar trend, hitting a low in the summer months. Yet, in 2010 and 2012, Asian stocks climbed significantly in the second half of the year.
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Could we see a rally this year? Chances are good, but keep in mind that the key difference in 2013 is the Federal Reserve’s talk of easing its monetary program, says Credit Suisse.
Looking at the data from the second half of 2010 and the second half of 2012, the firm finds the most promising areas were Asian cyclical stocks, which includes companies in the technology, consumer discretionary, energy, materials and industrials sectors, as well as companies in China and Korea.
Back in 2012, I highlighted research that showed howChinese stocks were looking inexpensivecompared to other emerging markets. I said that the negativity pendulum had swung too far and the market was due for a rally.
The rally was significant: From the beginning of June through the market peak in February 2013, the MSCI China Index rose about 27 percent.
Today, it looks like China is once more the place to dig for bargains. Among Asian equities, China and Korea are “still the two most undervalued markets in the region,” says Credit Suisse.
Here’s how theChina Region Fundis poised to participate in this potential rally.
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Past performance does not guarantee future results.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.
The MSCI China Free Index is a capitalization weighted index that monitors the performance of stocks from the country of China. The MSCI Asia ex-Japan Index is a free float-adjusted, capitalization-weighted index measuring the performance of all stock markets of China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand, India and Pakistan.
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