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Goldman Sachs sees Asian stock rebound in Q4

Mr Moe said that China's policy easing will be sufficient to cushion broader impact of trade friction.

Hong Kong

THE LAST quarter of the year has started on the wrong footing for Asian equities, but investors may soon get some respite, Goldman Sachs Group Inc strategist Timothy Moe says.

While the MSCI Asia Pacific Index has fallen every single day since October began, shares may recover as the quarter unfolds, the chief equity strategist for Asia Pacific said, citing stabilising global growth and the Chinese economy.

The region's markets are technically oversold, and the relative performance between the US and Asia is stretched enough to lead to a bounce back, Mr Moe added.

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History is on his side. Since 2009, the MSCI Asia Pacific Index fell only twice in the fourth quarter, data compiled by Bloomberg show. Tension between the world's two biggest economies, a strong US dollar and concerns over emerging-market assets have pushed the benchmark gauge down more than 9 per cent this year to a record low valuation relative to the S&P 500 Index.

"From here, it's a pretty good bet that markets manage to recover their footing and trade further up," Mr Moe said in an Bloomberg television interview with Shery Ahn and Haidi Lun.

Chinese shares offer "pretty interesting risk-reward," and their valuation of 10 times estimated earnings for the next year is attractive, according to Mr Moe, who reiterated Goldman Sachs's overweight call on the stocks. He sees opportunity in sectors related to infrastructure investment given the country's fiscal policy measures and improving fixed-asset investments.

Mr Moe has had a mixed track record with his calls on Asian stocks this year. While his January warning that the shares were at risk of a correction proved prescient, his team stayed bullish and in April raised its 12-month estimate for the MSCI Asia Pacific Ex-Japan Index. The gauge is now hovering around its lowest level since May 2017.

More comments from Mr Moe:

  • China's policy easing will be sufficient to cushion broader impact of trade;
  • Sees 12 per cent earnings increase in Chinese stocks next year, which is still "pretty good rate of growth";
  • Overweight Singapore as it's less exposed to trade issues and valuations are cheaper; the nation's key industries - such as banks, property and offshore industrials - are beneficiaries of rising interest-rate environment;
  • Cut India to market-weight from overweight in September as the risk-reward is no longer attractive. BLOOMBERG