‘Santa Claus’ rally may be under way in Asian markets
The rally that lifted Asia-Pacific stock indexes to records last week may just be getting started, if history is any guide.
In ’04 and ’05, Asian shares outside Japan had their biggest two-month advance in November and December. Anticipation that US consumers will buy more holiday gifts and international funds will flow into the region has lifted prices this year.
Indexes in Australia, Hong Kong, India, Indonesia, Singapore and Sri Lanka reached all-time highs last week. A Morgan Stanley Capital International Asia-Pacific stock index that excludes Japan is 0.3% away from its record, set in May, after rising 0.9% for the week.
“The US outlook has set the stage for a Santa Claus rally in Asia,” said Chong Sze King, trading manager at Asia Genesis Asset Management in Singapore. “Investors are buying in anticipation the markets this year will perform as they have historically.”
International investors have bought a net $117.8m of stocks so far this month in six emerging markets in the region, data compiled by Bloomberg shows. They purchased more shares in Asian markets outside of Japan than they sold in November and December for the past four years, according to Citigroup.
The MSCI index had a November-December gain in seven of the last 10 years and beat the average two-month performance in each year except two, ’03 and 1997. Last week’s gain was the eighth straight weekly advance, the longest streak since January.
Economic data released this month show growth in the US is weathering a housing slump. The unemployment rate dropped to a five-year low in October, the Labor Department said on November 3.
“The market has not quite yet factored in the earnings guidance in the technology sector,” said Aveline Chan, who helps manage $600m at Commerzbank Asset Management Asia in Singapore. “We’re likely to see good demand for hard-disk drive parts and gaming.”
Shares of Hon Hai have climbed 10% this month. Li & Fung has gained 0.5% for the month. Exports may not be enough to help Japanese companies avoid slower earnings growth. Company forecasts indicate pre-tax profit from operations will rise 2.1% for the year ending March 31 after climbing 12% in the first half. “Japan’s stock market has lagged behind other markets because investors’ sentiment over the earnings outlook is negative,” said Fumihiro Nakajima, who oversees about $1bn at Tokio Marine & Nichido Fire Insurance.
Shares in Asia excluding Japan changed hands at 2.2 times book-value at the start of November on average, according to Markus Rosgen, Citigroup’s chief Asian strategist in Hong Kong.
The ratio, based on the value of a company’s assets, was the second-highest for the month in the past 16 years. The only time the stocks were costlier, in 1994, the MSCI gauge fell 9.9% in the last two months to end the year 14% lower. “We’ve seen a strong performance in Asian markets and the major caveat now is the valuation of stocks,” Rosgen said. “While there’s a little more room to rise, the seasonal rally this year might be more muted.”
“We’re still very bullish,” said Hiroshi Yoh, who oversees $500m of Asian stocks at Tokio Marine Asset Management. “There’s a lot of liquidity in financial markets in Asia right now, helped by the strong economic fundamentals.”
Jorry Noeddekaer, who helps manage $1bn of Asian stocks at New Star Asset Management in London, said he expects exports to the US to power another year-end rally. “The US is a very well-managed economy and the US consumer still has a lot going for it,” said Noeddekaer. “That’s going to be very positive for Asian markets.”
In ’04 and ’05, Asian shares outside Japan had their biggest two-month advance in November and December. Anticipation that US consumers will buy more holiday gifts and international funds will flow into the region has lifted prices this year.
Indexes in Australia, Hong Kong, India, Indonesia, Singapore and Sri Lanka reached all-time highs last week. A Morgan Stanley Capital International Asia-Pacific stock index that excludes Japan is 0.3% away from its record, set in May, after rising 0.9% for the week.
“The US outlook has set the stage for a Santa Claus rally in Asia,” said Chong Sze King, trading manager at Asia Genesis Asset Management in Singapore. “Investors are buying in anticipation the markets this year will perform as they have historically.”
International investors have bought a net $117.8m of stocks so far this month in six emerging markets in the region, data compiled by Bloomberg shows. They purchased more shares in Asian markets outside of Japan than they sold in November and December for the past four years, according to Citigroup.
The MSCI index had a November-December gain in seven of the last 10 years and beat the average two-month performance in each year except two, ’03 and 1997. Last week’s gain was the eighth straight weekly advance, the longest streak since January.
Economic data released this month show growth in the US is weathering a housing slump. The unemployment rate dropped to a five-year low in October, the Labor Department said on November 3.
“The market has not quite yet factored in the earnings guidance in the technology sector,” said Aveline Chan, who helps manage $600m at Commerzbank Asset Management Asia in Singapore. “We’re likely to see good demand for hard-disk drive parts and gaming.”
Shares of Hon Hai have climbed 10% this month. Li & Fung has gained 0.5% for the month. Exports may not be enough to help Japanese companies avoid slower earnings growth. Company forecasts indicate pre-tax profit from operations will rise 2.1% for the year ending March 31 after climbing 12% in the first half. “Japan’s stock market has lagged behind other markets because investors’ sentiment over the earnings outlook is negative,” said Fumihiro Nakajima, who oversees about $1bn at Tokio Marine & Nichido Fire Insurance.
Shares in Asia excluding Japan changed hands at 2.2 times book-value at the start of November on average, according to Markus Rosgen, Citigroup’s chief Asian strategist in Hong Kong.
The ratio, based on the value of a company’s assets, was the second-highest for the month in the past 16 years. The only time the stocks were costlier, in 1994, the MSCI gauge fell 9.9% in the last two months to end the year 14% lower. “We’ve seen a strong performance in Asian markets and the major caveat now is the valuation of stocks,” Rosgen said. “While there’s a little more room to rise, the seasonal rally this year might be more muted.”
“We’re still very bullish,” said Hiroshi Yoh, who oversees $500m of Asian stocks at Tokio Marine Asset Management. “There’s a lot of liquidity in financial markets in Asia right now, helped by the strong economic fundamentals.”
Jorry Noeddekaer, who helps manage $1bn of Asian stocks at New Star Asset Management in London, said he expects exports to the US to power another year-end rally. “The US is a very well-managed economy and the US consumer still has a lot going for it,” said Noeddekaer. “That’s going to be very positive for Asian markets.”
posted by SY at 12:47 PM
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