After a Stock Meltdown, Some Asia Managers See No Rush to Sell

(Bloomberg) -- Some fund managers are sticking to their positive outlook for Asian equities even as fears grow over the global spread of the coronavirus.

AllianceBernstein Holding and Union Bancaire Privee are betting that easy monetary policies at the world’s central banks will help stocks weather virus concerns. AXA Investment Managers is bullish on corporate earnings, and AMP Capital Investors is keeping its equity exposure intact.

“We have been taking risk in our portfolios in view of continued global central banks’ monetary easing,” said Anthony Chan, chief investment strategist for Asia at Union Bancaire Privee. Declines in share prices on deepening concern as the virus spreads outside China provide a “better buying opportunity ahead,” he added.

Asian stocks extended losses to a fourth day Tuesday. Japan reopened following a holiday, with its steepest drop in more than a year, and the S&P 500 Index suffered its worst decline since 2018 overnight. The outbreak has killed more than 2,600 people and infected close to 80,000 worldwide, with more and more countries reporting cases. Still, the World Health Organization said it isn’t yet a pandemic.

To protect against downside risk amid “not too attractive” valuations, Chan said that Union Bancaire Privee is “using structured products, long-short hedge funds and non-directional strategies.”

‘Near-term wobble’

“The markets are due a near-term wobble” as economic data weakens, said David Wong, an investment strategist at AllianceBernstein in Hong Kong. However, “the benefit of global quantitative easing and the trade war truce should ultimately provide more upside to the global economy than the coronavirus will apply downside risk.”

AXA Investment is similarly steadfast, making few changes to its investment strategy for Asian equities. The sharp sell-off in stocks will be followed by a “rapid recovery,” much like what happened with SARS, Simon Weston, an equity fund manager at the firm, wrote in a note on Monday. Asia’s earnings are still expected to grow by mid-teen percentages, driven by technology and semiconductor companies, he said.

Not all Asia investors are so sanguine. Aberdeen Standard Investments and Northcape Capital last week flagged caution about the spike in confirmed infections outside of China.

Paras Anand, Asia Pacific’s chief investment officer at Fidelity International, warns that central-bank easing has pushed valuations ahead of underlying fundamentals for many parts of the market, and that successful strategies in the past may not work in the future.

“Whilst we feel that this could represent a buying opportunity, especially in Asia and emerging markets, investors would do well to recognize that this recent weakness may have a way to run given that it could be a sign that a well-worn playbook may have only just stopped working,” Anand wrote in a note Tuesday.

Nader Naeimi, the head of dynamic markets at AMP Capital Investors in Sydney, said his firm is maintaining equity exposure “as the worst of the outbreak is behind us.” But the firm is adding gold and silver as they are better hedges than fixed income in the current environment.

“The need for fiscal stimulus is real,” Naeimi said. While the outbreak “is deflationary at the start, it will most likely lead to sooner than expected return of inflation.”

To contact the reporters on this story: Moxy Ying in Hong Kong at yying13@bloomberg.net;Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kurt Schussler, Cecile Vannucci

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