Why Investors Need Not Worry Over the Asian Rally
Asian equities have seen a sharp rally in 2017 due to attractive valuations and upward earnings potential.
The Bloomberg J.P. Morgan Asia Dollar Index, which tracks the ten most active currencies in the region (excluding Japan), has spiked 3.4% since December 28.
While the weak global economic recovery has weighed heavily on Asian exports, domestic weakness has also played a role in the region’s economic slowdown.
Under Kim Jong-Un, North Korea has adopted a more aggressive stance toward its regional adversaries, fueling unprecedented tension in the region.
Manufacturing activity in India lost momentum in May 2017, with the India Manufacturing PMI (purchasing managers’ index) recording a decline.
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Apprehensions over climate change, an emphasis on global pension funds over the integration of ESG in their investments, and new markets will fuel demand for this type of bond.
At the end of 2016, 72.0% of the $180.0 billion climate-aligned bonds were listed in the stock exchanges.
The World Bank has projected an annual investment by cities of $100.0 billion through 2050 to prevent the harmful impact of climate change.
French aerospace firm Safran SA (SAF FP, +10.52%) edged out London Stock Exchange Group Plc (LSE LN, +10.38%) as the top International Moat Index performer in April. SAF FP also…
The international moat index, represented by the Morningstar Global ex-US Moat Focus Index, lagged behind the benchmark index in April.
A higher allocation to Asia could certainly provide diversification benefits to investors while enhancing their risk-adjusted returns.
The EAFE Index provides exposure to slow-growing developed markets while disregarding Asia’s fast-growing markets (FXI) (INDA).
The correlation between US and international markets varies depending on market cycles.
In the short term, Asian benchmarks and ETFs have also performed better than US-focused funds.
Many Asia benchmarks covering high market capitalization across the region provide exposure only to Chinese stocks (FXI) (EWH) listed in Hong Kong, also known as H-shares.
Although American investors have focused on domestic markets in the past, investors seeking long-term capital appreciation need to focus on Asia as well.
The rapid rise in income levels and robust population growth in Asian nations (AAXJ) should sustain strong consumption growth.