Baring Asset Management's multi-asset arm has upgraded emerging Asia from neutral to “preferred” due to stabilising fundamentals, a weaker US dollar and China’s stimulus.
The firm says it is the first time in years that it has increased its exposure to emerging Asian equities.
Marino Valensise, head of Barings’ multi-asset group, said: “We believe the scale of the credit boom unleashed in China over the past few months is significant and should benefit emerging Asia. We are viewing this as a temporary cyclical recovery, while the secular story remains more downcast. For this reason, our allocation has been modest so far.”
The firm’s multi-asset group has also upgraded high yield credit from preferred to “strongly preferred”.
Barings is cautious on Europe, in part because of the UK’s Brexit referendum – though European equities remain rated as preferred. The repercussions of a vote in favour of Brexit would be “material” for markets; Barings is, therefore, holding 25% in foreign currencies while underweighting sterling
Favourable statements by the US Federal Reserve, which Barings views as more dovish in terms of monetary policy, have partly led to a retracement in the US dollar, benefitting the overall tone in emerging markets and for US earnings prospects, the firm says.
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