Jay Roberts, RBC Wealth Management
Asian markets have not been affected much by the Korean issue to date.
The Korean won has been flat for months and the KOSPI is close to its all-time high, for example. There was a curiously, close correlation between the renminbi and gold over the summer, but it is unclear if this is coincidental.
Asian equities markets have shown real strength this year. Generally, the move higher has been driven by the positive alignment of global leading economic indicators.
Going forward, steady Chinese data would be supportive of Asian stocks, though the mercurial Chinese economy is always hard to fathom.
For some markets, idiosyncratic factors such as the strength in Samsung Electronics in the KOSPI or the re-rating of the Apple supply chain in Taiwan have been influential.
Japan’s TOPIX index, which has the highest concentration of manufacturing and industrial companies of any developed market, is highly leveraged to global PMIs. The strong performance of that market is as expected.
We continue to believe that the TOPIX is undervalued relative to the trajectory of corporate earnings.
We prefer Asian equity funds that have unconstrained strategies, are more concentrated and have an above average exposure to mid-cap stocks as sources of alpha.