Buy Asian Equities Now With ‘Blood on the Street’: Fund Manager
Many Asian stocks are trading at cheaper valuations than during the last financial crisis in 2008, according to one fund manager, who says now’s a great time to buy.
“I always go back to famous statements that people like Buffet and the Rothschilds have made about buying when there's blood on the streets,” Joshua Crabb, Director & Portfolio Manager, Asia Equities at investment firm BlackRock told CNBC on Monday. “Being greedy when others are fearful.”
According to Crabb, one in seven Asian stocks are currently trading below their 2008 price-to-book ratios. Crabb, whose Asia Pacific Equity Income Fund was down 8 percent year-to-date at the end of August, says he’s been buying equities despite recent declines.
“We're seeing a lot of value starting to develop now… Sometimes in the short run you have to wear a little bit of pain, but that's how you make the long returns,” says Crabb.
In terms of what’s cheap, Crabb says one in five stocks in South Korea are trading below their 2008 price-to-book valuations. He believes stocks there have priced in the bad news after investors punished the country, because of its export-oriented economy.
Crabb says Chinese stocks are even cheaper, with one in three below their 2008 price-to-book valuations because of fears of a hard landing.
He believes the problems in Europe and the U.S. could actually benefit Asian equities by helping to ease inflation concerns.
“The reality of this is that it brings inflation under control,” Crabb says. “If we look at the concerns Asian central banks have, a lot of it’s around inflation and some markets around property prices. With what's occurring, this is taking a lot of that pressure away.”
Despite Asian economies correlation to their Western counterparts, Crabb believes, the region has capacity for growth, as firms, governments and consumers have low levels of debt.
“The fundamentals in Asia are strong, there are better demographics, better valuations, better balance sheets,” he says. “These things will matter, even if the short-term correlations are higher.”
Crabb recommends investing in high dividend stocks over bonds, because he says bonds could suffer if inflation were to rise.
“Yields [for stocks] are higher than what you can see in other asset markets and the simple reality is that these are inflation protected income streams.”