HONG KONG (Reuters) - Asian equity markets have already discounted much of the bad news about the trade war between Beijing and Washington and the slowdown in China economy could offer some bargains in 2019, insurer AIA Group’s chief investment officer said.
Speaking at the Reuters Global 2019 Investment Outlook Summit in Hong Kong, Mark Konyn said lower oil prices will take some pressure off the region’s most troubled markets — India, Indonesia and the Philippines — while monetary easing in China is likely to prevent a sharper slowdown.
“Equities in this region will offer opportunities because of the volatility,” Konyn said. “Are we close to the end? Markets have heavily discounted the bad news that we’re now confronting.”
He expected another round of earnings revisions into next year, but said markets had likely already priced them in.
Nevertheless, China’s drive to de-risk its financial sector resulted in “over-tightening”, Konyn said, and while this was being corrected with monetary easing and other stimulus measures and won’t lead to a major credit event, it can still cause “stress” and “casualties.”
Particularly at risk are property developers, once a darling of creditors, Konyn said. They have a combined $33.4 billion of bonds maturing in the first quarter of 2019, according to Refinitiv data.
Of that, $5 billion is offshore, the rest in mainland yuan-denominated bonds.
China Evergrande Group’s $1.8 billion bond sale this month has sent a chill through Asia’s dollar bond markets, with the dizzying double-digit coupons casting doubts on fundraising plans of rivals.
“Some of those companies are going to face some difficult situations,” Konyn said.
On the other hand, infrastructure investment was picking up in China, offering opportunities in basic industry firms, such as those in the steel sector.
AIA will also seek more private deals, both in fixed income and equities, as tighter monetary conditions globally are likely to push companies towards those markets, which now are “more favourable to investors than issuers.”
The group’s asset allocation in 2019 will be “more global” and one of the sectors that looked like a good buying opportunity regardless of geography was technology, Konyn said.
“The technology sector looks like it’s approaching a point where the market has heavily discounted the future value of these franchises, to the point where we’ve seen tremendous correction in many of those names,” he said.
Reporting by Marius Zaharia, Noah Sin, and Sumeet Chaterjee; Editing by Sam Holmes