MSCI All Country (AC) Asia Pacific ex Japan index has risen 11.8 per cent so far this year, and MSCI AC World index is not far behind having risen 11.5 per cent. This is in stark contrast to the 6.4 and 10.8 per cent falls these indices respectively experienced in the fourth quarter of last year. One of the main reasons for these falls was investor caution due to aggressive rhetoric between the US and Chinese governments over the implementation of trade tariffs. Easy trade has been a boon for global businesses and any restriction of this could hit company profits and returns.
This year the trade tensions seem to have eased, but the falls from 2018 have left the market looking very cheap, according to Ayaz Ebrahim, manager of JPMorgan Asian Investment Trust (JAI) – even with this year’s bounce-back.
“The Asian equity market is still trading well below its average,” he says. “Price-to-equity ratios are better than in Europe, Japan and the UK. Dividends look good and the price-to-book ratios look okay. The history of Asian equities since 1995 suggests that the probability of making an absolute return over the next 12 months is very high.”