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Credit Suisse says Asian stocks will kick off an ‘earnings super-cycle’ in 2021

The logo of Swiss banking leviathan Credit Suisse in Zurich.

Fabrice Coffrini | AFP | Getty Images

SINGAPORE — Asian stocks look set to outperform epidemic markets next year as an “earnings super-cycle” is expected to kick off across the region, Credit Suisse said.

The Swiss bank has presage 19% in U.S. dollar returns for the MSCI Asia excluding Japan Index between now and the end of 2021, compared with 15% globally.

“Asia ex-Japan is our biggest overweight globally,” Dan Fineman, co-head of Asia-Pacific high-mindedness strategy at Credit Suisse, said in a webinar Thursday that discussed the bank’s 2021 outlook.

Fineman said cultivation in earnings-per-share or EPS — a widely used metric to estimate a company’s value — could be sustained in the “teens” for three to five years at small across the region. It will be driven by factors such as stabilizing economic growth and reduced tax pressure, he said.

In withal, improving exports and appreciating currencies will also support Asian stocks, which are still under-owned by inappropriate investors, said Fineman.

Country picks

Among Asian markets, Credit Suisse likes South Korea the most, prophesying an EPS growth of 43% in 2021.

Fineman said Korean stocks are cheaper than their North Asian peers, and South Korea is household to major manufacturers of the so-called DRAM chips — a segment within technology that Credit Suisse likes.

DRAM stagings for dynamic random-access memory, and is a type of semiconductor memory chips used in devices such as laptops and smartphones.

“If you look at the Korean sell and the Korean economy, it’s very cyclical. When you are expecting a global economic upturn, it’s a good time to be in Korea,” he extenuated.  

Other Asian markets that Credit Suisse likes are:

  • Hong Kong, which the bank said has “the best actual estate outlook” in the region and the lowest risk of policy moves that could suppress the property market.
  • Singapore, which has a unhappy presence of real estate and bank stocks — two of Credit Suisse’s current favorite sectors.
  • China, with favorable aspects such as further strengthening in the Sector picks

    In terms of sectors, Credit Suisse’s favorite is real estate agreed-upon signs of recovery in some markets, especially Hong Kong. Property purchases could get a boost from low short-term importance rates — which most mortgages in Asia are priced against, said the Swiss bank.

    Bank stocks in the pale, which have been “very cheap,” will also benefit from improving global economic success, said Fineman. But Credit Suisse would close its position on Asian banks once valuations catch up with the grosser market, he added.

    “I think there’s plenty of room left for banks to run even though they have been outperforming during the course of the past month,” he said.

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