Don’t Expect a Lasting Revival in Asia’s Value Stocks

(Bloomberg) -- Hopes for a lasting revival for value stocks are dying a slow death in Asia.

Value stocks among the top 2000 companies in the region have seen a two-percentage-point underperformance versus growth peers in the past week, according to calculations by Bloomberg. That’s after the MSCI Growth Asia Pacific Index beat its value counterpart for four weeks through Oct. 9.

The move shows the outperformance of the value gauge has reversed versus its growth counterpart and it remains firmly in the downtrend it has been in all year. Renewed concerns about the health of the global economy has helped bolster higher-growth shares -- which are seen as a defensive play -- while the retreat by bond yields has weighed on financials which make up part of the value universe.

The factor rotation away from value “has been characterized by many as representing defensive sectors making a comeback vis-a-vis cyclical sectors,” said Nomura Securities Co. analyst Masanari Takada in a note Tuesday. “We have our doubts that a value market could take shape under the present circumstances.”

The emergence of a genuine value market would not only require a revival in risk appetite, but also a pick-up in global inflation expectations and large-scale credit easing in China, he added.

Apart from avoiding value plays, some investors are re-jigging their portfolios in other ways to shun assets that are too expensive. Societe Generale is reducing exposure to Treasuries and U.S. and European credit to avoid “overly aggressive” pricing in bond markets, and increasing allocations to American and Japanese shares, multi-asset strategists including Alain Bokobza wrote in a note.

Stock-Market Summary

• MSCI Asia Pacific Index ex-Japan down 0.5%
• MSCI Asia Pacific Index down 0.5%
• Japan’s Topix index down 0.4%; Nikkei 225 down 0.6%
• Hong Kong’s Hang Seng Index down 0.5%; Hang Seng China Enterprises little changed; Shanghai Composite down 0.1%; CSI 300 down 0.3%
• Taiwan’s Taiex index down 0.7%
• Australia’s S&P/ASX 200 down 0.6%; New Zealand’s S&P/NZX 50 down 0.5%
• Singapore’s Straits Times Index down 0.3%; Malaysia’s KLCI down 0.4%; Philippine Stock Exchange Index down 0.8%; Jakarta Composite little changed; Thailand’s SET little changed; Vietnam’s VN Index little changed
• S&P 500 e-mini futures up 0.3% after index closed down 1.6% in last session

--With assistance from Cormac Mullen.

To contact the reporters on this story: Ishika Mookerjee in Singapore at imookerjee@bloomberg.net;Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Cormac Mullen

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