BlackRock Asia Weekly Market Views

16 Feb 2016

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Weekly Highlights

Intra-regional divergence has been growing since the start of 2016. ASEAN has led the region while China and India have lagged. Indonesia has been the best performer in Asia year to date after disappointing for most of 2015. The government is planning to push ahead with economic reforms as it seeks to boost its manufacturing and industrial sectors to foreign investment. This should help offset weaker export performance (namely commodities) and contribute towards economic growth expectations of 5.2%.
China’s central bank governor Zhou Xiaochuan reiterated last Friday that there is no basis for sustained renminbi depreciation and signalled against the intention for a sharp one-off devaluation. This is in line with our expectation that renminbi shall remain stable against the trade weighted currency basket, while a sharp devaluation of the currency against US dollar is highly unlikely, especially as the pressure on renminbi against US dollar may ease if Fed turns more dovish.
The Bank of Japan (BoJ) introduced negative interest rate regime at the start of the month, which lifted markets, but reversed recently amid strengthening Japanese yen. A strengthening yen (JPY seen as safe haven currency) in past week shows lack of faith in policymaker solutions and fears on global growth.
Asset allocation remains relatively muted as we navigate through a market predominantly driven by policy. We continue to tilt the portfolios towards value, but being selective and stock specific, given the valuation gap that has formed in our markets. We are also keeping cash levels low as signs emerge of a less hawkish Fed which could potentially signal an end to US dollar strength and a risk reversal.

Country views from the BlackRock Asian Equity Team

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