Rallying higher and higher

After a disappointing 2011, global investors have been on a “risk on” mode in 2012. Recently, a better-than-expected sovereign debt auction result in Spain and Italy after their downgrades starts to improve market sentiment. In addition, the extended low interest rate decision by the Fed also gives support to many riskier assets such as equities and commodities.

In 2012 thus far, BRIC countries (Brazil, Russia, India and China) and Global Emerging Markets (GEMs) have outperformed the other parts of the world by a huge margin, in line with our earlier research calls for investors to overweight GEM and China. Our less-positive views on Europe, Malaysia and Indonesia have also been right, as evidenced by the sluggish performance of these markets thus far.

Table 1: Market Performance
Market/Sector Year-To-Date Return (%)
Russia 22.7
Brazil 18.8
India 16.5
Tech 15.1
Taiwan 13.7
Singapore 13.5
Thailand 13.5
GEMs 12.3
Hong Kong 12.0
Asia ex-Japan 11.7
China 11.0
Korea 10.7
Europe 8.2
US 7.7
Japan 6.9
Australia 4.7
Malaysia 3.2
Indonesia 1.7
Source: Bloomberg, as of 15 March 2012
excluding dividends and in RM terms


Bigger Bull Run To Come
Many investors may have missed the strong rally in January and February and they are worrying if the markets are “too high” to invest right now. We believe that even after the rally since the year began, our favourite markets in 2012 namely GEMs and China are still trading at extremely attractive valuation levels.

The potential upside for GEMs and China by end-2013 is about 52% and 87% respectively based on our relatively conservative projection (as of 15 March 2011). Don't forget that these, and most other markets, have not yet come back to pre-August 2011 levels. Weak sentiment still prevails and the bigger bull run is yet to come!