It's time to relocate from fixed income to equities, especially Asian markets, as the era after zero rates is approaching, an investment expert said in Hong Kong on Tuesday.
"International investors are interested in direct exposure to China. They are going to look into all different ways to do that," Russ Koesterich, chief investment strategist of BlackRock, said during a media briefing.
Koesterich said that though tapering is running to an end, the global interest rate is expected to rise only at a steady pace, given the US Federal Reserve is estimated to move mildly.
BlackRock pointed out that continuous easing in Japan and Europe is expected to support the markets in Asia. As global liquidity is set to remainaffluent, international investors are coming back to Asia equities. "People are back to Asia because compared with developed markets, this part of the world looks inexpensive -- particularly China and Japan," he said.
According to Koesterich, stock is abargainright now, compared with fixed income. However, investors need to be specific about their choices. "The US market has gained most so far.
The problem for US is good news has been priced in for the last two years.
The market has boomed over 50 percent," he said. "We expect lower return in the next five years."
"Instead, investors should look globally for stocks in the future," he added. "Selling of emerging market equities has run its course. Currently they are traded at a 30 percent discount of developed markets. They are not cheap on absolute basis, but still relatively cheaper than the developed markets."
Meanwhile, he also pointed out thatsentimentis improving in Asia, because China's economy is stabilizing.
"Previously, people worried about China crashing. But the latest data suggests the country has managed to decelerate," Koesterich said. The second half this year will probably be better than the first half. China's GDP growth rate is likely to stay above 7 percent. That's supportive to Asia markets."
"If investors feel good about the global economy, if they believe there is acyclicalrebound and the pace at which interest rate rises is as measured, then emerging market stocks are earning decent position because their valuation is not very stretched," he added.
