Investing.com – BofA research shows investors expect stable, if limited, returns from Asian equities outside Japan over the next 12 months as hopes for an economic recovery in China and higher earnings rise.
The survey, conducted in early May, showed that the majority of fund managers surveyed expected returns of between 5% and 10% from Asian stocks excluding Japan over the next 12 months.
41% of survey respondents also expect the Chinese economy to strengthen over the next 12 months, up significantly from the 10% observed in February, BofA said.
The change in expectations comes as Chinese stocks have rebounded sharply from multi-year lows hit in February. Beijing was also seen taking a host of measures to support local equities and the real estate market, which has been a key point of contention in the economy.
Fund managers also expect the stock to rise broadly, driven mainly by strong earnings over the next 12 months.
BofA said fund managers remain “overwhelmingly positive” on semiconductor stocks, as well as technology and industrials stocks overall. They were against utilities and real estate.
Among regional markets, Taiwan and India have been the favorites, although fund managers appear to have cooled towards India since March.
Fund managers remained largely wary of Thailand as the rout in local markets caused by political differences did little to attract bargains or contrarian purchases.
Japan remains top choice among fund managers
But in wider Asia, Japan remains the top market of choice for fund managers, BofA research has found.
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This trend continued even as Japanese stocks underperformed regional stocks in April.
But even as Japanese markets hit record highs in the first quarter, BofA said most fund managers had yet to see a top for local stocks.
A weak yen weighed on that outlook, especially as the currency hovered near 34-year lows despite instances of alleged government intervention.
Bank of Japan policy is also expected to largely determine the price of Japanese stocks, especially the central bank’s plans to further tighten monetary policy.