Fund managers bullish on equities despite recent correction

http://www.channelnewsasia.com/stories/marketnews/view/1062151/1/.html
By Chris Howells

SINGAPORE : Fund managers are turning more bullish on equities and said returns in Asia could rise 10-15 per cent per year for the next three years.

They said investors who can stomach risk should be overweight equities in the medium term, but expect more volatility in the short term.

They also said the markets could see good liquidity due to Asia's economic strength and continuing low interest rates in the West.

Asian markets had their worst month in May since the collapse of Lehman Brothers in September 2008.

Jitters from Europe's sovereign debt crisis forced investors to take money off the table and stocks tumbled.

But analysts are turning more bullish on equities, saying valuations are now at more attractive levels.

"Fundamentally, you see economic growth numbers coming through quite nicely. The recovery is taking place quite nicely in many parts of the world, especially in Asia and many emerging markets where the growth numbers are a lot stronger, and I think this is going to continue," said Vasu Menon, VP of Wealth Management Singapore, at OCBC Bank.

For retail investors, observers said those with a low risk appetite should still be underweight equities, by holding cash and bonds.

Those with a bigger appetite for risk, however, should allocate 70-80 per cent of their portfolio to equities.

Experts said Asian markets are likely to return to levels seen before the recent correction by year end, and cite Singapore's STI as an example.

"I expect that the Singapore index will be higher in the end of the year than now. Perhaps we can test the 3,300 mark, but longer term I think the previous highs should be surpassed," said Anthony Hoe, head & senior fund manager at Phillip Securities.

Some money managers, however, said investors should be careful not to pile into markets on the recent correction, but accumulate slowly over coming months.

They also said the domestic demand plays in Asia should be favoured. These include banks, food and beverage companies and those with export-oriented exposure. - CNA /ls