Asia-Pacific News

Valuations Reasonable; Japan Looks 'Cheap': Strategist

We're in a cyclical bull market with equity valuations hovering at reasonable levels, said Ajay Kapur, global strategist at Mirae Asset Securities.

"Companies are in really good shape even though sovereigns might not be.. and equity valuations are pretty reasonable -- at about 12, 13 times next year's earnings," he said on CNBC Tuesday.

'Underweight' Asia

"Our advice to our clients, especially our hedge fund clients (during the earnings season) to cut down your net exposure, maybe buy some protection, and go for a holiday," Kapur said.

He warned that market sentiment in the last week had become "exceptionally euphoric" and suggested investors should take their foot off the accelerator through the U.S. earnings season.

"Come back in a month's time as the cyclical bull resumes."

Japan 'Cheap', but Underweight Asia

Kapur also added that liquidity was abundant, especially in the west and even in Japan.

He recently raised his recommendation on Japanese equities to 'neutral' even though the market has outperformed the region.

"For the first time in two decades, (Japan is) looking relatively quite cheap compared to other regions in the world and it's also looking very cheap compared to its own history," he noted.

"Try to buy some small cap Japanese stocks if indeed that market turns around like it seems to be, and in terms of sector selection, my strongest idea is to buy technology stocks," Kapur advised.

On the flipside, Kapur said his firm had a lukewarm view on Asia since late last year and was one of the few houses in the world that was 'underweight' the region.

"I think Asia is looking relatively expensive compared to other markets like Japan or even Europe and the U.S."

Kapur cited a second reason -- the impending tightening measures by Asian central banks. He also noted that historically whenever the U.S. dollar gets stronger, Asian markets tend to underperform.