Asian central banks are expanding their balance sheets again after 15 months of deceleration, offering a positive for stock’s valuation multiples and for stocks with risk attributes compared with quality plays, Citigroup says.
“North Asia is the risk and value trade, Asean is the low beta, expensive quality trade,” it says, noting risk has outperformed quality stocks by 10% since summer lows. “Asean is a consensus overweight, which we believe will make the rotation towards risk sharp and sudden, as investors seek to sell large holdings in smaller, less liquid markets.”
It notes earnings revisions are shifting toward cyclicals and away from defensives, which it expects to support the move away from defensives; “rising liquidity signals a brighter growth outlook, and the biggest beneficiaries have historically been cyclicals, real estate and financials.” Within Singapore, it cites Dairy Farm and Singapore Exchange as expensive quality plays, and Noble as having both risk and value attributes.
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