• The short-term ebbs and flows we are currently experiencing are nothing but a proverbial 'tempest in a tea cup'. Financial instability in Europe and an economic soft patch in the US heighten risks, but not enough to derail the ongoing global recovery
• Volatility and mixed data signals are the norm at this stage of the cycle. We find comfort in attractive valuations, supported by realistic earnings growth expectations. Asian equities as an asset class are cheap relative to cash and inflation
• Asian markets probably bottomed at the end of March and should end the year comfortably higher than current levels. The passing of QE2 is unlikely to be a big event. The associated risks are rising bond yields and capital outflow in the early part of 3Q. We believe the stage is set for a 2H rally after the removal of this overhang.
• We are maintaining our Overweight recommendation in Taiwan, Malaysia and Indonesia whilst Thailand is downgraded to Underweight. China, Hong Kong and India are still Underweight. Korea is upgraded to Neutral.
So, the window of opportunity may close soon, or be the wall to hit soon in full speed.
Stunning difference, that is very obvious in the picture below, creates views like this:
Asian demand is the main determinant of its own fate
Click on chart to enlarge, courtesy of DBS.
Well, there are views that the "main determinant of its own fate" may face serious problems of rebalancing ...