For the year ahead, T. Rowe Price is cautiously optimistic about both global and Asian equities and has moved to an overweight position in emerging markets equities, according to its top executives.

Anh Lu, portfolio manager for the Asia ex-Japan equity strategy, said valuations are attractive again relative to long term history and relative to developed markets. The risk of demand slowdown due to deleveraging in China and trade war tensions has already significantly reflected in share prices.

‘We expect some policy fine tuning in China to accommodate economic growth and private sector investments should trade war tensions continue to rise over the next 6-12 months.

‘Elsewhere in Asia, currencies and local rates have made most of the necessary adjustments to reflect stronger US dollar and rising USD rates,’ Lu added.

In Asia, T. Rowe Price prefers companies that enhance their innovation capabilities in areas such as health care, automotive, home appliances, robotics, environment, and other consumer applications.

Lu said the firm also continues to favour companies that are gaining more market share and those that will benefit from pricing power and industry consolidation.

‘We see value in companies with improving fundamentals due to capital expenditure discipline,’ she added.

Global, EM equities 

In the global equity space + rated John Linehan, said economic acceleration, high consumer and business confidence, strong earnings growth, the electoral cycle, and widespread innovation all favour a bull market in the near term. 

‘However, we will likely see a market tug of war, which should favour investment strategies that are opportunistic and focused on stock selection,’ the CIO for equity said. 

Compared to developed markets, emerging markets have underperformed by a wide margin this past year – and A-rated Justin Thomson believes there are several reasons for this.

He said the rising rates are headwinds for emerging markets, and country-specific risks could trigger broader contagion. What’s more, trade tensions have the potential to derail Chinese and global growth.

‘But we are on the lookout for factors that could be upside surprises in 2019, including innovation in China, rising profitability in Japan, and a possible Brexit resolution,” the CIO for international equity explained.

T. Rowe Price’s multi-asset division moved to an overweight position in emerging markets equities, as valuations have become very attractive on the back of recent underperformance.  

Although idiosyncratic and political risks remain elevated in several key countries - Thomas Poullaouec, who heads the Asia Pacific multi-asset solutions team - doesn't believe these concerns pose a systemic risk.

'Despite trade tensions, emerging markets are likely to benefit from stable commodity prices, ongoing stimulus measures in China, and a more stable US dollar,' he said.