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Stocks rise to attractive destination as dovish Fed continues: Barings
By Son Ji-hyoungPublished : Sept. 2, 2020 - 15:41
Top officials of US investment firm Barings said Wednesday that stocks appear to be an attractive destination for investors, propelled by the US central bank’s dovish stance to support monetary expansions coupled with signs of recovery in the economy.
Foreign investors can take advantage of a currency hedging premium thanks to the dovish US Federal Reserve and following weaker US dollar when investing in emerging market stocks including ones in Korea, the officials noted.
During a teleconference with Korean reporters, Christopher Smart, head of Barings Investment Institute, said US stocks are increasingly becoming more attractive destinations for investors, partly as the dovish US Fed is starting to push real yields of bonds to the negative territory, so that bond investors might have to accept a loss for buying the fixed-income securities.
“I think it is the choice among the different asset classes, in which equities look still relatively attractive now,” said Smart, who leads the research arm of Barings, adding US stocks could stand out given strong earnings of the companies and expectation of continued recovery in the near future.
The same could be true for emerging markets, as investors may tap into currency hedging with the US Fed’s monetary expansion further weakening the greenback.
“As the dollar weakens, money flows to other higher growth economies like Korea,” Smart said. “I think there is probably still room for further weakening in the economy particularly after the Fed’s announcement of its very dovish approach in its new framework. ... For the foreseeable future, it looks like the trend will continue.”
John Park, representative director at Barings Korea, said during the teleconference that Korean stocks have room for growth as the nation’s exports are picking up, the industrial shift to digital is accelerating and local retail investor engagement remains robust.
Park added that long-term value investors in the Korean stock market should begin to take into account a fresh methodology to evaluate a Korean company’s intangible assets like software, technology equipment and research and development capabilities, given their growing role in the digital transformation that is driving the robust growth of online businesses amid the pandemic.
Barings was globally overseeing $346 billion worth of assets as of June, with $6.3 billion exposed to emerging market stocks.
By Son Ji-hyoung (consnow@heraldcorp.com)
Foreign investors can take advantage of a currency hedging premium thanks to the dovish US Federal Reserve and following weaker US dollar when investing in emerging market stocks including ones in Korea, the officials noted.
During a teleconference with Korean reporters, Christopher Smart, head of Barings Investment Institute, said US stocks are increasingly becoming more attractive destinations for investors, partly as the dovish US Fed is starting to push real yields of bonds to the negative territory, so that bond investors might have to accept a loss for buying the fixed-income securities.
“I think it is the choice among the different asset classes, in which equities look still relatively attractive now,” said Smart, who leads the research arm of Barings, adding US stocks could stand out given strong earnings of the companies and expectation of continued recovery in the near future.
The same could be true for emerging markets, as investors may tap into currency hedging with the US Fed’s monetary expansion further weakening the greenback.
“As the dollar weakens, money flows to other higher growth economies like Korea,” Smart said. “I think there is probably still room for further weakening in the economy particularly after the Fed’s announcement of its very dovish approach in its new framework. ... For the foreseeable future, it looks like the trend will continue.”
John Park, representative director at Barings Korea, said during the teleconference that Korean stocks have room for growth as the nation’s exports are picking up, the industrial shift to digital is accelerating and local retail investor engagement remains robust.
Park added that long-term value investors in the Korean stock market should begin to take into account a fresh methodology to evaluate a Korean company’s intangible assets like software, technology equipment and research and development capabilities, given their growing role in the digital transformation that is driving the robust growth of online businesses amid the pandemic.
Barings was globally overseeing $346 billion worth of assets as of June, with $6.3 billion exposed to emerging market stocks.
By Son Ji-hyoung (consnow@heraldcorp.com)
