(April 16): North Asia’s tech-heavy equity markets offer better risk-reward than their South and Southeast Asian peers that are relatively more vulnerable to the oil shock triggered by the Iran war, according to Goldman Sachs Group Inc.
The investment bank has initiated a “relative value trade” by going long on South Korea and Taiwan, and shorting India, the Philippines and Thailand, analysts including Kamakshya Trivedi and Sunil Koul wrote in a note. While China’s economy is relatively better-placed in the current energy shock, “earnings delivery will likely be needed to catalyse a stronger up move in the market,” they added.
Equities in emerging markets have staged a stronger rebound than their global peers in April amid the optimism sparked by a two-week ceasefire deal between the US and Iran. Risk sentiment has stayed strong as the two sides are said to consider further extending the temporary truce. The MSCI Emerging Markets Index is up almost 15% so far this month, versus a gain of less than 9% for a gauge of world stocks.
“We remain constructive overall as valuation and positioning had reset meaningfully,” the Goldman analysts wrote, referring to EM stocks. “Underlying profit growth is likely to be strong, with 16 percentage points of our 23% MSCI EM 2026 earnings growth forecast driven by AI-related demand, which should be relatively insulated from the direct impacts of the oil shock.”
Outside of Asia, the analysts prefer Brazil due to “commodity tailwinds,” and favour South Africa for its “inexpensive valuations.”
See also: Emerging-market stocks rise to record high on tech boost
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