Better China Outlook Leads the Asian Market Rally, Says Josef Johann Bauer

Online, October 7, 2013 (Newswire.com) - It looks like investors are putting aside tapering fears and focusing on fundamentals. Asian markets have recovered from the August sell off led by a better economic outlook in China and Japan. Chinese shares listed in Hong Kong gained 20 per cent from the year's low as investors see upside in the cheap valuation.

Stock markets in the Philippines, Jakarta and India are leading higher on the basis that a better Chinese economy would have a spill-over effect in these export-dependent countries.

Investor sentiment is rosier after China's exports jumped to 7.2 per cent in August from 5.1 per cent previously, and Japan's upward revision of GDP in Q2 to 0.9 per cent from 0.6 per cent added to this positive outlook.

Adding further to a China recovery, a recent survey by Josef Johann Bauer, the financial advisory firm in Austria, released today showed a 14 per cent jump in hiring by businesses. This indicates a healthy employment outlook in the fourth quarter, with companies confident in their outlook for the rest of the year.

"Strong numbers for industrial production and retail sales will further fuel the buoyant sentiment that could last for the rest of the week. Factory production rose to a 17-month high with 10.4 per cent from a year earlier, and retail sales met expectations, advancing to 13.4 per cent," said Gertrude Smidt, a Senior Portfolio Manager at J.J.B.

"The trickle-down effect is evident in the Asian currencies with India's rupee leading the gain last week with an advance over 5 per cent, followed by the Indonesian rupiah and Philippine peso, both rising over 1.25 per cent," Smidt added.

The other factor supporting the rebound in Asian markets can be credited to the retreat in crude oil's prices, allowing these economies the breathing space to rebalance themselves.

"It is clear from last week's development that investors are shifting their focus towards economies that would surprise on the upside, and which have potential for growth. China clearly fits these criteria, prompting analysts to expect Chinese stocks to enter into a bull market," concluded Ms. Smidt.