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BlackRock’s Swan: Asian growth outlook still trumps developed world

BlackRock’s Swan: Asian growth outlook still trumps developed world

Asia offers more opportunities for growth than developed markets, even after the recent sell-off in stock markets in the region, according to BlackRock's head of Asian equities, Andrew Swan.

In a market update, the Citywire AAA-rated manager said he believes Asia offers attractive investment prospects in the medium and long-term.

‘Despite some near-term growth stumbles, Asia’s prospective growth rates are still three times that of developed economies, it is 6% vs 2%, according to Goldman Sachs estimates. New industries are emerging all the time and billions of purchasers are upgrading their consumption habits,’ Swan said.

‘When Asia has traded in the valuation range of 0.9 to1.4 times book value (current level is 1.3 times book value, Citigroup data shows), then the probability of a positive return on a 12-month and 36-month view is greater than 80%.’

While there may be positive signs of growth in the region, Swan, who runs several funds including the $2 billion BGF Asian Dragons fund, thinks investors should look for indications that this growth will continue to develop.

‘The challenge is ensuring that this growth is well-balanced and sustainable. There are encouraging signs: UBS research, for instance, indicates China’s services sector now makes up more than 50% of GDP; but there is more to do,’ he said.

Monetary Policy

In his update, Swan citied India and China as good countries to invest in, as government monetary policy can help earnings. ‘Asian real rates remain elevated, offering scope for further interest rate cuts. China and India lie at the heart of this equation.'

 'A credible package of monetary loosening – allied to targeted fiscal spending and continuation of the reform roadmap – can ensure that Asia benefits from its own mini-QE programme, helping to bolster valuations and earnings.'

The BGF Asian Dragon fund returned 39.56% in US dollar terms over the three years to the end of July 2015. This compares to a rise of 17.6% by its Citywire-assigned benchmark, the MSCI AC Asia Pacific ex Japan TR USD, over the same period.

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