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Morgan Stanley equity strategist Norman Villamin said Wednesday that recent stability in global policy suggests that policy action may be reactive in addressing the emerging global slowdown of the equity markets.
Villamin, Asian-Pacific Equity Strategist at Morgan Stanley, made the remarks Wednesday at a press conference on Asia-Pacific stocks market.
He said, "We have trimmed our global and regional economic outlooks, with our global growth forecast now at 2.4 percent."
He said renewed slowing in regional economies is expected to fully manifest itself in the second quarter of 2003, driving a realization that the passive stances of policy makers require adjustment.
He said that rollovers in the US and global leading indicators remain unpriced, which helps create regional, country or sector opportunities.
He expected equity markets to drive policy makers to action by pricing in this risk through mid-year and leading to more aggressive policy action.
Villamin said while regional valuations remain near historical lows, for the first time since 2000, Asian equities have experienced a sustained widening of the valuation gap versus the United States and Europe.
The cyclical component of the valuation trend suggests the bulk of this widening is due to cyclical factors, likely the SARS-driven slowdown in the region. Once reversed, a trading opportunity may emerge to return the valuation gap back to pre-SARS levels.
He said that "absent a rally driven by an end to the regional SARS threat, we continue to believe that there is no region-wide catalyst to drive a broad-based rally in Asian equities through mid-year."
He said telecom stocks appear best positioned to outperform global peers as this gap closes while material stocks seem to be in the least favorable position.
He listed the key overweights as Australia, Korea, Singapore, Indonesia in terms of country, as well as bank, consumer and media stocks in terms of sector.
The equity strategist added that the region's key underweights include Taiwan, Malaysia and Thailand in terms of country, materials, IT and industrial stocks in terms of sector.
(Xinhua News Agency June 5, 2003)
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