TO KEEP SHINING
When you don’t have good earnings, that’s when people are looking for value,” said Praveen.
Hopes for pro-business US policy changes under the administration of President Donald Trump will likely also keep expectations for economic growth elevated, helping to maintain the case for growth stocks.
“The value stocks have done okay but growth has done so much better in the anticipation we’ll see a pickup in economic growth,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
“Companies that are going to be more levered to economic growth tend to be growth stocks.”
“Right now I don’t see a long term condition for value stocks to outperform growth,” said Nolte.
JP Morgan Asset Management’s global market strategist David Lebovitz says that trend
Increase in the Russell 1000 Growth Index, which tracks
growth shares has been changing.
“It’s not going to be smooth sailing for one or the other. We think there’ll be times people are more optimistic about the economy and in those cases, value can rally.
“Then you’ll see periods where people are less optimistic about the economy, as we’ve seen over the course of the first quarter.
“If economic trends look better in the second quarter, value stocks will do better,” he said.
In Asia, the MSCI AC Asia ex Japan growth index, is up 18.5 per cent so far this year, compared with a 12.6 per cent gain for the comparable MSCI value index.
Investment in India, traditionally a growth-driven market, has adjusted in recent years as value stocks have narrowed the gap with growth, which still lead, said Jayesh Shroff, co-founder of investment advisory Cask Capital in Mumbai.
“That is because people were paying a premium for growth and somehow the growth did not materialise. That’s why value came back and growth has taken a slight back seat,” said Shroff. dwellers declined last year?
One answer to that question may be — the government. Even as construction stagnates in the private sector, the public sector could award as much as S$24 billion (RM75 billion) in new contracts this year, up from S$15.8 billion last year, Singapore’s Building and Construction Authority estimates. Given UOB’s
Still, he said, as soon as growth returns, he expects investors to switch back from value.
In China, between 2009 and the 2015 stock market crash, smallcap growth stocks were the market’s darlings, but “a new rotation into value blue-chip investments started last year”, said Shanghai Minority Asset Management Co fund manager Zhou Liang.
“This year, money will flow into blue-chips, as small-caps weaken and lose their lustre,” said Zhou.
In Europe, the best outlook for corporate profits in seven years has ignited investor appetite for growth stocks, which are now up twice as much as their value counterparts so far this year, a reversal of the trend seen last year.
As a result the MSCI International Europe growth Index has jumped 8.9 per cent this year so far, compared with a 4.5 per cent gain for the MSCI International Europe Value index.
With such a big gap between US growth and value stocks, some investors are eying overseas investments. Reuters dominance of the construction loan market, it might have the momentum to ride this growth, said Phillip Securities.
A Hong Kong-style housing bubble would have been nice. In its absence, bank CEOs will have to amuse themselves with stable crude prices and shipping rates, and hope the carnage in corporate lending is over. Bloomberg