Asia seen as market driver
Mark Newman
Boutique fund manager K2 believes Asia will be the bright spot for international equities in the next couple of years.
K2 chief investment officer Mark Newman said while Chinese growth has fallen from highs of about 12 per cent last year, it wouldn’t go into negative territory.
“I don’t think China’s growth will fall below 7 per cent this year,” he said.
“If it goes between 7 to 9 per cent that is still a reasonable rate of growth.”
However, Newman warns there will still be some disappointments from Chinese stocks during the year, but the overall picture looks good.
“Some of the excesses in Asia during the past few years have now left the system,” he said.
“They have the ability to restructure quickly due to the strong foreign currency reserves.
“But there will be some earnings risks with certain Asian companies.”
While Asia will be the saviour of the international equities sector for the remainder of the year, K2 does see some hope for the US.
“We are confident we are seeing the end of the bear market in the US,” he said.
“The US economic situation is more advanced than in Australia and this is creating some opportunities.”
Newman said the fund manager was looking at some sectors in the US economy that are operating on record lows.
“Our view is there is scope for improvement as the economy responds to the financial stimulus,” he said.
“But we won’t see much recovery in the US until the middle of next year.”
With global economic recovery patchy, K2 doesn’t believe in following the MSCI index for its investment strategy.
The fund manager is looking for investment opportunities that lay in mega trends that are beyond territorial borders.
Its current investment themes are carbon economics, global gas arbitrage, defence and water.
K2 is looking at holding stocks that are significant players in these trends.
“Global investing still allows us to access many opportunities, regardless of markets, where we see secure earnings growth at reasonable valuations,” Newman said.
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