Fund managers expect lower returns from Asia-Pacific region (excluding Japan), as continued weakness in economic activity delays recovery in earnings profile. According to the latest Bank of America Corp (BofA) fund manager survey, the market outlook for the region is at one year low as the perception of undervaluation fades.
Further, none of the fund managers currently expect a double-digit return from the region over the next 12 months.
While 42% of the fund managers surveyed by BofA expect 5-10% returns in the next one year, none expects a double digit return now. That compares with about 10% of them expecting higher returns in last month. Additionally, about a third of the fund managers expect up to five percent returns from the region.
However, among the markets in the region, the survey confesses a likening towards India with a net overweight of 28%, whereas Thailand remains the most unloved with an underweight of 8%. Not surprisingly, the stock exchange of Thailand has corrected as much as 18% in US dollar terms so far in 2023. While India’s Nifty50 is up 8%, Shanghai Composite and Hang Seng have come off 7% and 11%, respectively during the same period.
The share of investors in Asia, who expect a stronger economy in the next 12 months has also fallen to 15% from 39% in August, as investors take stock of higher rates, stronger dollar and flare-ups in oil prices.
Nevertheless, the silver lining is that stagflation is not being projected either, as net 23% of investors expect price rises in Asia to subside in the next 12 months – a lowest decile reading.
The BofA report, dated October 17 further said, 35% of participants think a re-test of the October-2022 lows in the China equity markets is a possibility, while a super majority (73%) believe a structural de-rating process is underway. Unsurprisingly, China allocation dropped 15ppt to the steepest net underweight position in a year.
(Edited by : Anand Singha)
