BlackRock 2017 outlook: Optimistic on Asian stocks, debt default risks to stay low

DESPITE market volatility in the region after the US elections, asset management giant BlackRock on Tuesday struck an optimistic outlook for the coming year.

With policymakers in the developed world leaning towards fiscal stimulus, "extreme value" in Asia can be unlocked, said Andrew Swan, BlackRock head of Asian equities, in a presentation to journalists on Tuesday.

"We are increasingly optimistic on Asia given positive signs of reflation and a recovery of nominal GDP (gross domestic product) growth in China. This should lead to dramatic improvement in industrial profits and plays very positively for the region," he said.

Neeraj Seth, BlackRock head of Asian credit, said he expects the US Federal Reserve to raise interest rates by 25 basis points (0.25 percentage point) in December and just two more times in the coming year.

"The Fed . . . made a very clear statement on being behind the curve and letting the economy run a bit hot. . . Trying to move the expectations for Fed hikes higher is somewhat premature," he said.

He said default risks are expected to remain low in 2017, and expects the Chinese government to focus on expansionary fiscal policy and a neutral monetary policy.

"Faced with ageing populations and the continued need for safe income from Asian as well as global investors, we expect demand for Asian credit to remain strong, while the maturity profile remains well spread over the coming years and manageable going into 2017," he said.