(pictured: Graham Harman)
Australia, New Zealand and India represent relative bright spots in the Asia Pacific region according to the latest quarterly global markets outlook from Russell Investments. While the firm is still predicting a soft landing for China, it says: “if there is a year when sceptics will be proven correct, this is it”.
The study ‘Late Cycle Volatility’, predicts business cycle support for global equities to weaken and government bond prices to remain rich in 2016, as the difference between hawkish (US) and dovish (Europe, Japan) monetary policies drives market volatility.
Graham Harman, Russell senior investment strategist, Asia-Pacific, says: “Among the bright spots we see in the Asia-Pacific region are India, which is growing strongly, and Australia and New Zealand, where property markets remain surprisingly well-behaved.
“In Australia and New Zealand, though, there is a risk that recession in the commodity sectors could broaden to the still-booming housing sectors.”
Overall, however, the firm’s view on global equities has shifted downward and it now sees low single-digit returns as most likely for 2016. The strategists still prefer Europe for equities and remain wary of long-term interest rate exposure.
Asia-Pacific markets are out of favour, the report notes, and display poor medium-term momentum. “We view short-term rallies in late February and in March with suspicion,” the report says.
“On an absolute basis, we expect low returns and high volatility from regional equities. In relative terms, we believe Asia Pacific equities offer better value and have a more favourable policy backdrop than US equities.”