REUTERS - East Asian stocks
are expected to have a better run next year, provided U.S. equities perform
well on U.S. President-elect Donald Trump's tax cut plans and
investors
overcome concerns about a pending rise in protectionism, a Reuters poll found.
Asian stocks have
performed unevenly this year, as a series of events from China's currency depreciation
in January to the Brexit vote in June to Trump's shock election victory last
month led to massive capital outflows from the region.
While the recent
rise in major sovereign bond yields bodes well for stocks in general, several
equity strategists said the outlook over the next six months was hazy,
especially as it remains unclear how far Trump would go to fulfill his campaign
promises that hinge on trade protectionism and migration curbs.
Still, the poll
taken over the past 10 days showed equity strategists largely stuck to bullish
views, their default position.
They expect the
Shanghai Composite Index .SSEC,
down 10 percent this year, to rise to 3,375 points from Tuesday's close of
3199.65.
From there, it is
expected to end 2017 at 3,650 points, up 14 percent from now. But forecasts
were in a wide range, from 3,250 to 3,905.
"With the
possibility of large fiscal stimulus during the Trump administration, Asian
equities could benefit from stronger growth and steeper yield curves, but could
also suffer from U.S. dollar strength," Manish Raychaudhuri, an equity
strategist at BNP Paribas, wrote in a recent note.
"U.S. trade
policies under the Trump administration are currently even less clear than
domestic fiscal policies and investors will have to grapple with likely
turbulence caused by trade policies in 2017."
Hong Kong's Hang
Seng .HSI index
is expected to rise some 7 percent from now until end-2017 to 24,290.
South Korea's Kospi
Index .KS11 is
forecast to gain by a similar amount and climb to 2,135 from Tuesday's close of
1989.86.
Those Kospi
forecasts, however, appear optimistic considering Seoul's heavy reliance on
Beijing for exports.
In a study detailing
the potential fallout on the economy, South Korea's central bank said a knock
on its exports could be expected if China shipments to the U.S. weaken as a
result of Trump's protectionist trade policies.
Taiwan's Taiex Index .TWII is
set to rise about 6 percent from here until next year-end, the poll showed.
Trump spoke by phone
last week with President Tsai Ing-wen of Taiwan, the first by any U.S.
president or president-elect in nearly four decades, triggering a formal
protest from China, which saw it as an infringement of the "one
China" principle.
A further
deterioration in relations, already under strain after Tsai was elected in
January, could dent Taiwan's economy as a major chunk of its exports are sent
to China.
In the near-term, if
the U.S. Federal Reserve delivers a rate hike next week, policymakers'
forecasts on the number of rises to come next year will become a key concern.
Should Trump's
planned sweeping tax cuts lead to much higher inflation expectations, the Fed
could tighten policy more steeply than thought now and could push the U.S.
dollar, already at 14 year highs, even higher. [EUR/POLL]
"That may
accelerate capital flows from Asia," said Robert Hsieh, vice president of
Shin Kong Investment Trust in Taipei.
A lot, however,
depends on China's economy and how it performs in 2017 with concerns about
overcapacity in many industries, risks from an overheated housing market and
weak global trade flows.
The world's second
largest economy has recently shown signs of stabilization in growth after a
flurry of debt-fuelled spending. But many are now concerned about the threat
China's mountain of debt poses to its future economic performance.
Stocks in the wider
region, such as in Australia, and Japan are also expected to perform better
next year. [EPOLL/AU] [EPOLL/JP]
Indian stocks,
however, won't scale the record highs strategists had predicted just a few
months back, mainly because Prime Minister Narendra Modi's currency clampdown
is seen knocking economic growth in the next few quarters. [EPOLL/IN]
(For poll data
EQUITYPOLL1)
(For other stories
from the Reuters global stock markets poll)
(Polling by bureaus
in Bengaluru, Seoul, Shanghai and Taipei; Additional reporting by Carol Lee in
Taipei, Jing Wang in Shanghai; Editing by Ross Finley and Kim Coghill)
Follow Solenzo Blog on
0 Comments