Baring said that in the wake of a “highly unusual first quarter”, which saw extreme volatility followed by strong gains, it has shifted part of its allocation from Japan into emerging Asia markets. The move was largely driven by China engaging in monetary and fiscal stimulus.
The multi asset team also believes a weakening US dollar has provided respite to emerging markets in general and these factors will be supportive for the local and regional economy with some of the benefits spilling over into developed markets.
“Japan is the one major region in which data has been genuinely lacklustre,” said Marino Valensise, head of the multi asset group. “With the Bank of Japan struggling for traction in its war to help the yen depreciate, it was time to reduce the position. We retain an exposure to Japanese equities, but the bar has now been set higher for corporate Japan and for Shinzo Abe’s government.
“We believe the scale of the credit boom unleashed in China over the past few months is significant and should benefit emerging Asia. We are viewing this as a temporary cyclical recovery, while the secular story remains more downcast. For this reason, our allocation has been modest so far.”
Other asset allocation developments at the firm include an upgrade for US high yield from preferred to strongly preferred.