BlackRock Says Indonesia, India Stocks Should See Better 2021

(Bloomberg) -- Stronger growth and a low interest rate environment will continue to benefit Asia stocks, especially those in lagging markets outside North Asia, according to BlackRock Investment Institute.

Countries that have suffered more from the pandemic, such as Indonesia and India, will have a “significantly better 2021,” said Ben Powell, the organization’s chief investment strategist for Asia Pacific. Once vaccines are distributed, a combined pick-up in economic activity and persistent low rates should fuel a sustainable global cyclical recovery in the next six to 12 months, he said.

“I think the nuance now is that the relative preference within Asia, at the margin, is shifting from North Asia -- China, Korea and Taiwan -- toward some of the economies that suffered more,” he said in a phone interview on Tuesday. “We think there is more upside in those markets.”

Asia stocks had their best month since 2009 in November, thanks to progress on the development of a coronavirus vaccine. Rotation into lagging stocks helped the MSCI Asean index beat the broader Asia benchmark by more than five percentage points last month, with the outperformance continuing in December.

That said, North Asian equities remain a “good place to be in” given strong economic data. Emerging market stocks could also benefit from the potential inflows as investors rethink developed market bonds’ role in portfolio amid a drop in real yields, he said.

Other calls from the BlackRock Investment Institute, according to its 2021 outlook:

• Keep pro-risk stance in low-rate environment; likes U.S. equities and prefers high-yield bonds for income
• The pandemic has accelerated geopolitical transformations, such as a bipolar U.S.-China world order; prefers EM equities, especially Asia ex-Japan, and is underweight Europe and Japan
• The pandemic has also accelerated structural trends including an increased focus on sustainability; recommends taking a barbell approach that favors both tech and healthcare as well as selected cyclical stocks

©2020 Bloomberg L.P.