Ask The Experts: Market Rally Catalysts Remain Intact
Ng Soo Nam, Chief Investment Officer, Nikko Asset Management Asia Ltd shares his outlook on why markets should continue to rally.
-In the asset management industry, not many fund managers are turning bullish at the moment. What's your outlook for Asia for 2012?
Too few fund managers are prepared to look longer term. 'Short-termism' is an occupation hazard, because we are always under the pressure to deliver results, especially on a quarterly basis. It is not enough to be good thinkers; we need to stand against the crowd and that requires strength in personality. What I demand of myself is to be able to stand my ground, whether I'm contrarian or not is irrelevant.
We turned less bearish in early 4Q 2011. There were tremendous opportunities back then and stock valuations were attractive after stock market selloff in August and September. China's growth momentum continues to be very strong, too strong in fact, because inflation became a problem but I had the confidence they would be able to achieve a soft landing. The multi-year story is intact.
Recent economic data add to our confidence. The biggest risk this year is the EU sovereign debt crisis and how it will be resolved. Back in 4Q 2011, there are many ways they can resolve it, and we can't find a reason why policymakers will allow the situation to spiral into a chaotic situation, e.g. a breakup of EU. Our bet at that point is they will muddle through, we still hold the view today and we have been proven correct. As long as the situation in the EU doesn't get worse, growth in the US and Asia will remain quite positive as far as equity markets are concerned in 2012.
- What sort of catalysts do you see driving performance?
Ultimately it is back to our philosophy of buying into good companies that are riding on strong, positive themes, and buying stocks at cheap valuations. The rally in the last few months has been encouraging, but it is still far from expensive territory. What more catalysts do we need than these enduring ones.
You mentioned Europe as a risk; are there other risks you see in the market?
We don't know what It will be, e.g. Middle East security issues. As far as these are concerned, the big picture for Asia, e.g. US is calibrating its engagement with Asia, how China is responding, but the risks are improving, e.g. improving cross-straits relations after presidential elections in Taiwan.
- What's one theme you strongly believe in?
One of the themes that we have populated in our portfolio for a couple of years is China's urbanisation theme. That theme has a few sub-themes; 600 million people living in cities and it is expected grow to 1 billion people by 2030. There are a lot of investment implications for companies, not just listed in China but elsewhere in the region, e.g. Singapore and Hong Kong companies that are invested in retail property malls in cities.
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