Stock markets in Asia continue to head south with little to signal a turnaround in the new quarter, but regional experts told CNBC investors should capitalize on attractively low valuations instead of piling cash.
“There are great buying opportunities right now and if you have money in cash it’s not going to be safe, inflation is going to come,” Martin Hennecke, Associate Director at financial advisory, Tyche, said Monday.
According to Hennecke central banks in the U.S. and Europe are likely to inject more money into their economies and as a result inflation will be exported around the world.
“Stocks may not actually be the worst thing to own, since they can't be inflated or printed away as easily as cash or bonds,” he said.
With major indices including Hong Kong’s Hang Seng hitting 2009 lows on Monday, Hennecke and Brook McConnell, President at asset management firm South Ocean Management, are turning their attention to Greater China stocks.
“I’m more inclined to be adding to (positions) here...with (Hong Kong stocks trading at) 2 and 3 times earnings….it’s just remarkable,” McConnell said.
He adds that’s investors should not try to predict when or wait for the Hong Kong market to bottom, but instead should focus on the potential gains that can be made over a 12-month period, starting now.
Hennecke agrees investors should not take a short-term view on the markets, and recommends investors take a look at Chinese consumer stocks, which in addition to being cheap, offer a hedge against inflation.
“In theory at least they can float on inflation because they can put up their prices for goods and services they sell in line with inflation,” Hennecke said.
Focus on the Resource Space
Outside China, Tim Schroeders, Portfolio Manager at Pengana Capital, sees some “outstanding opportunities” in the global resource sector.
He says that, “For more cautious investors gold is still a very good place to be, particularly on a risk reward basis. If inflation goes ahead and is a bit more prevalent than people think at the moment (gold will benefit).”
Schroeders recommends buying shares of the world’s largest listed gold company, the Toronto-listed Barrick Gold .
On a 12-month prospective price-to-earnings multiple of under 10, it is an excellent value on a risk/reward basis, he said. “The stock is as cheap as we have seen in a long, long time.”
While several money managers are using the fall in Asian stock valuations to snap up bargains, Khiem Do, Head of Asian Multi-Asset Team at Baring Asset Management, says he has very low equity exposure at the moment.
Do says given the very poor sentiment in the stock markets, the majority of Baring Asset Management’s funds have been allocated to cash, gold and bonds including U.S. Treasurys, German bunds and Australian bonds.
“As far as the medium-term is concerned, obviously as we all know, the situation in Europe has to be resolved, and that's why we want to still maintain a conservative position at the moment,” Do said.