Investment experts at RBS Coutts have painted
an optimistic outlook for the Asian economy over the remainder of
2011 as inflation is expected to decline and a continued US
economic recovery is forecast to provide an encouraging backdrop
for Asian risk assets.
Norman Villamin, head of investment strategy
for Asia at RBS Coutts, noted that the global economic recovery
continued in the first half of 2011, led not only by expected US
growth, but also by strong growth in parts of Europe and Asia.
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“As the US gradually moves towards the
expansion phase of its cycle, we believe the strengthening US
recovery will continue to support annual returns in the range of
10-15% for Asian and emerging market equities,” said Villamin.
He added that a sharp fall in oil prices
should also prompt inflation levels in Asia to decline throughout
the summer and the second half of this year.
Investor sentiment to be
restored
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By GlobalData“As we roll forward in the second half of this
year, oil, which had been a big contributor to the upswing in
inflation over the last six months, will start to be a big
detractor. That means the month-on-month data will increasingly be
better for investors,” said Villamin.
Villamin made the comments following the
release of an investment outlook report from RBS Coutts called
Focus on Asia.
The report notes that Chinese equities, which
have been trading at 15.7 times their historical earnings, have
been sitting well below their long-term average.
However, it argues that attractive valuations
and stabilising inflation, combined with ongoing currency
appreciation, should restore investor sentiment and restart inflows
into Chinese equities in the second half of 2011.
Chinese equities remain volatile
Volatility in Chinese equities is likely to
remain elevated, says the report, but fiscal restraint and
continuing efforts to cool both lending growth and property prices
should temper equity-market speculation.
RBS Coutts also expects the Chinese renminbi
and Singapore dollar to be among the strongest currencies in Asia
relative to major developed market currencies.
Nick Cringle, global co-chief investment
officer at RBS Coutts, said: “Despite the year-to-date
underperformance of Asian and emerging market equities, we remain
confident in the economic outlook for Asia, and expect these
markets to resume their lead, driven by superior economic
fundamentals and supported by slightly cheaper valuations relative
to their developed-market peers.”
