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Asia strategy - Safety First

Shared By Stock Fanatic on Wednesday, June 27, 2018 | 27.6.18

June events shaping up to a volatile 3Q

Recent correction presents bargain hunting opportunities on technical rebound but upside may be limited; market indices unlikely to return to January’s peak this year

Picture for 2H doesn't look pretty as global liquidity could tighten further to dampen risk appetite

• More upside risks for the US dollar and US bond yields to weigh on Asia equities in 2H18

Be highly selective – Overweight HK/China and Singapore which are relatively safe-haven plays. Despite fears of the trade war escalating, we believe China/HK are relatively safe from further sell off as most companies derive their earnings from the domestic economy and its valuation has fallen below average for the first time in the past 5 years

• Neutral on highly volatile EM ASEAN, but not Underweight, due to lower valuations after the recent sharp sell-down. Fundamentals are still strong to support bargain-hunting activities

We have a non-consensus Overweight on Malaysian equities as fiscal and debt concerns are overblown; the overhang will ease when new budgets (2018 revised and 2019) are announced

Favourable risk/return reward in Korea as geopolitical risks ease for now after the US-North Korea summit

India and Taiwan are our Underweights as relative resilience so far pose downside risk and limit upside potential on rebound

• Our key stock and sector picks focus on domestic stocks which will not be impacted by trade wars, beneficiaries of rising interest rates and those which are not exposed to currency weakness. Key picks are in the Banks and Oil & Gas sectors as well as several sectors in China which are the focus of reforms.

Source : DBS Group Research
(Read Report)

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Posted on Wednesday, June 27, 2018 | 27.6.18
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