While high-profile hedge fund managers such as Ray Dalio go full-on negative on the region, Nikko Asset Management Asia’s Peter Sartori says that China, as well as Asia’s emerging markets, will continue to beat its first world peers.
According to the Straits Times, Sartori argues that there’s still a compelling case for a “long-term bull market” in the region, despite all its recent routs and regulatory missteps:
“The pace of initiatives appears to be increasing in China, particularly in the state-owned enterprises and financial services space…While naysayers argue that the attempted shift from an investment-led economy to a consumption-led economy will result in a major dislocation in financial markets, we believe that the government has enough tools and capital at its disposal to make the transition successfully.”
He also adds that the nation’s highly-scrutinized GDP doesn’t really mean anything to the equity market, saying:
“Does GDP matter from the stock market point of view? No. There’s no strong correlation between economic growth and stock market returns. In fact, it’s the opposite. When Japan and Korea’s economies were growing, their stock markets’ returns were lacklustre. When growth slowed in those countries, their markets went through a long and sustained bull market. That’s what’s under way now in China.”
While he does have a point, low growth in the new and open China seems to be uncharted territory for most, and the fact that Beijing’s been behaving like a riddle wrapped in a mystery within an enigma doesn’t help his argument either.
That said, Sartori’s also betting on India in the medium term, asserting that all the nation’s recent troubles “provide scope for looser fiscal and monetary policies.”
India bulls are sure to love that.
Photo: groucho