Goldman Sachs ‘ Asia strategists say markets are facing a “troubling triad” of rising rates, recession risk and dollar strength — but they expect some stocks to benefit. These are their top picks for buy, many of which are also on Goldman’s conviction list. Goldman strategists Timothy Moe and others stated that the Asian regional markets have had one of their worst start in over 30 years. 11. This year’s MSCI Asia-Pacific ex Japan Index fell more than 16%, and has seen five consecutive months with declines. The analysts stated that in the past, the 5 consecutive months of cumulative declines in the MSCI Asia-Pacific ex Japan Index were: -14% in 2020 due to the Covid epidemic; -17% (tech bubble burst); -112% (Asian Financial Crisis); -11% (FOMC rate rise shock) in 1994. Moe said that the weakening is due to rising interest rates and recession fears in the U.S., as well as rising U.S. dollars strength. This low-volatility fund offers stability in times when Dow swings 1,000 points. Stocks may build upon Fed rally but volatility isn’t going away Goldman stated that the near-term outlook was “still challenging” due to these external pressures as well as domestic headwinds like slowing Chinese growth. The bank has reduced its MSCI Asia-Pacific ex Japan Index forecasts due to its expectation for more volatility in the near-term. However, the bank still believes there is potential upside for 17% for the next twelve months due to forward earnings growth, moderate valuation recovery, and possible upside for the MSCI Asia-Pacific ex Japan Index. Goldman recommends that banks stock be picked on themes that are “able to deliver alpha returns in an even more beta-challenged setting.” These include positive EPS (earnings delivery). [earnings-per-share]The bank stated that revisions and margin winners, rate-rise beneficiaries (“Buy-rated banking institutions), commodity supercycle [commodity cyclicals (vs. global)] and cash return (“secure high dividend yield”) are all possible. Investors use beta and alpha to assess the success of their investments. Beta measures the volatility and return of a security, while Alpha is an indicator of its investment’s return. Goldman stated that banks tend to perform better due to their fundamental exposure, which includes higher NIMs and greater investment portfolio yields. Also, they have a historical positive price relation with lower rates. Goldman’s top picks for buy include South Korea’s KB Financial, State Bank of India & Bank Rakyat Indonesia. All are on Goldman’s conviction list — its analysts’ top picks across the bank’s coverage. Goldman has also included DBS Group in Singapore, HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSBC HSB Chartered and Indonesian Bank Central Asia.
Washington Federal Reserve Building, 26 January 2022
Reuters| Reuters
Goldman Sachs‘ Asia strategists say markets are facing a “troubling triad” of rising rates, recession risk and dollar strength — but they expect some stocks to benefit. These are their top picks for buying, many of which are listed on Goldman’s conviction list.
