Feb. 13 (Bloomberg) -- Citigroup Inc. and Nomura Holdings Inc. recommend investors stay bullish on stocks in Asia excluding Japan after a benchmark index rallied more than 20 percent as valuations and liquidity underpin further advances.
Citigroup analysts led by Markus Rosgen said it was too early to reverse their bullish stance on Asian markets even amid investor nervousness as “valuations remain supportive,” according to a report dated today. Asia’s rally may grow “sloppier” from here, Nomura analysts led by Michael Kurtz said in a separate report, “but that won’t make the returns any less real.”
The MSCI AC Asia excluding Japan Index climbed 25 percent from its Oct. 5 low through last week on improving U.S. economic data, efforts to contain Europe’s sovereign-debt crisis and signs China will act to support growth. Last week’s advance capped the sixth straight week of gains, the longest winning streak since October 2010.
“Global excess liquidity continues to increase,” the Citigroup analysts wrote in their report. “We would be a buyer of corrections.”
The U.S. Federal Reserve on Jan. 25 extended its pledge to keep interest rates near zero through 2014. MSCI’s Asia excluding Japan gauge trades at 11.7 times estimated earnings, down from about 14.6 times at the end of 2010. The index plunged 19 percent last year, its biggest loss since 2008.
The rally in Asian stocks may undergo a “consolidative pause” before resuming, supported by valuations and a queue of buyers, the Nomura analysts wrote. Too few investors had benefited from the stock rally because much of the regional markets’ gains came at lower volumes, they said.
“As such, even with the re-pricing of Asian equity risk now well along, the rally arguably is only just shifting into ‘phase two,’” the analysts wrote.
Stock trading around the world fell to the lowest level since at least 2006 even as global equities entered a bull market. About $79 billion of shares changed hands each day on average during the 100 days through Feb. 9 on the New York Stock Exchange, along with bourses in Shanghai, Tokyo, London, Hong Kong, Toronto, Paris, Sao Paulo, Mumbai and Frankfurt. That’s the least since Bloomberg began compiling the data six years ago.
--Editors: Darren Boey, Chan Tien Hin
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