Asian markets are the most attractive in the world to fund managers, according to a new survey by financial services consultancy and investment solutions firm Russell Investments.
China and Korea rated most highly, while India and Indonesia fared less well in Russell Investments' second quarterly Asian investment manager outlook, based on the views of nearly 50 professional money managers across the region as of the start of Q3 2011.
The investors' intentions are in line with recent figures that revealed a decline in H1 2011 equity trading volumes in the US, offset by rising activity in Asia. The backdrop of unresolved sovereign debt problems in Europe, heightened concerns over a slowdown in the US economy and ongoing political tensions in the Middle East and North Africa have all contributed to the relative appeal of Asia as a preferred investment destination.
Some 78% of respondents favoured Asia relative to developed economies, with 83% of surveyed managers aligning their portfolios to take advantage of Asian consumer growth.
“Managers are attracted to Asia's stable economic fundamentals, strong corporate earnings and the realisation of growth potential of companies in their share prices,” said Sarah Lien, senior research analyst at Russell Investments.
Within Asia, there were disparities. Some 63% of managers indicated that they remain positive about China, with many downplaying local debt and contagion effects on the basis that should there be any domestic banking crisis, the government has access to sufficient liquid capital markets to prevent a collapse.
Furthermore, some 47% see positive growth potential for Korea, with strong corporate cash flows and high manufacturing productivity growth cited as the key factors underpinning the country's growth.
However inflationary and interest rate concerns meant that 48% of respondents were ”bearish' on India while 51% were cautious about Indonesia. Elsewhere, the Philippines saw an 8% increase in interest from managers, compared to the previous survey.
At the sector level, managers remain positive on stocks that directly benefit from the growth of domestic private consumption in Asia. Some 59% of managers indicated that they prefer consumer discretionary stocks, 56% are ”bullish' on consumer staples and 50% are bullish on industrials.
Conversely, given the inflationary environment across the region and the risk of further tightening measures, managers were most bearish on interest rate-sensitive and heavily regulated sectors like real estate investment trusts, financial and utilities.