Asia fund managers bullish on China stimulus- BofA survey

Asian fund managers turned bullish on regional markets following a barrage of stimulus measures from China, a BofA survey showed this week, with Chinese markets seeing increased fund allocation. 

Expectations for returns from Asia ex-Japan rose, with 90% of panelists seeing gains a year from now. Profit expectations from the region also grew, as valuations continued to be seen as largely fair, the BofA survey showed. 

BofA said that participants believed “this time is different” for China, in that more investors were confident that the Chinese economy will recover on improved discretionary spending and investment. But they also warned that the recent run-up in Chinese markets sapped the potential for short-term gains. 

BofA conducted the survey in early-October, covering responses from 128 participants with total assets under management of $273 billion. 

The survey comes after China announced a slew of monetary and fiscal stimulus measures over the past three weeks, sparking sharp gains in local stocks. But a lack of clear details on the size and timing of the planned measures somewhat dulled optimism over the new measures. 

Still, Chinese markets saw increased positioning on the increased stimulus, although this came at the expense of positioning in India. Indian stocks had fallen sharply in tandem with a rally in China over the past three weeks. 

Investors continued to favor technology over most other sectors, while also adding financial services and consumer discretionary on the prospect of “targeted policy actions” in China. But they remained skeptical of real estate, while artificial intelligence and semiconductor plays remained the most popular in China. 

For other regions, the BofA survey showed fund managers expressing “unequivocal optimism” over the growth outlook for Japan- for both the economy and company earnings. 

78% of respondents expect positive equity returns in the next 12 months, as private consumption picks up on the back of increased wages.

The Bank of Japan is also expected to face difficulty in raising interest rates further, especially amid a change in Japan’s political leadership. 

Japan was the favorite market in APAC, while Taiwan was a “distant second,” the BofA survey showed. 

The survey showed investors expecting “sustained underperformance” in South Korea.

Source: Investing.com