Asian Markets Not ‘Out of the Woods,’ Barclays Says

By Jonathan Burgos

April 13 (Bloomberg) -- Asian equity markets are not yet clear of trouble although the recent rally suggests the worst is over, said Barclays Wealth Management.

“We aren’t completely out of the woods,” said Manpreet Gill, Asian Strategist at Barclays Wealth, which manages $213 billion, said in a telephone interview. “We are still seeing negative export growth data.”

The MSCI Asia Pacific Index has surged 25 percent from a more than five-year low on March 9 as governments and central banks expanded measures to stem the global recession.

“Conditions have definitely improved but the rally in itself has been quite sharp over a very short period of time so most probably we might see some correction,” Gill said.

Corporate earnings may continue to disappoint and are among key risks investors should watch out for, he said.

To hedge against such risks, Barclays is advising clients to invest in stocks of industrial, materials, consumer discretionary and technology companies as well as high-yield corporate bonds, Gill said.

The rally in global equities has been “powerful,” though problems in financial markets may cause indexes to revisit lows, investor Jim Rogers said.

“When you see a rally like this coming off the bottom, it lasts longer than anybody expects,” Rogers, chairman of Singapore-based Rogers Holdings, said in an interview with Bloomberg Television. “I would expect to see more problems, probably this fall.”

Chinese stocks should continue to outperform as economic conditions in China have “improved much more” than anywhere else, Gill said.

The Shanghai Composite Index has gained 38 percent this year, making it the second-best performer among 88 key stock gauges tracked by Bloomberg globally. Stocks rallied on optimism the government’s trillion yuan ($585 billion) stimulus package and record new lending will spur a recovery in the world’s third-largest economy amid the global recession. Interest rates were cut five times from September to December.

Gill is also bullish on prospects for stocks in India, Singapore and Hong Kong.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.