(Bloomberg) -- Nine months ahead of schedule, Credit Suisse Group AG's 2017 target for Asian stocks has already been met. There's just one thing stopping the bank from raising their forecast -- Donald Trump.
While strong economic fundamentals argue in favor of a boost, concern over the U.S. president's protectionist agenda -- and what it could mean for the trade-reliant region -- is behind the hesitation, said Sakthi Siva, Credit Suisse's head of Asia-Pacific equity strategy in Singapore. At the moment, Siva's team predicts the MSCI Asia ex-Japan Index will end the year at 580 points, a level it crossed two weeks ago.
“The only thing holding us back from raising that target is Trump,” Siva said at Credit Suisse Asian Investment Conference in Hong Kong on Wednesday. “We're taking this time to consider what his policies will be, but he failed on healthcare and people are now saying that the border-adjustment tax is also unlikely.”
Exposed to some of the world's fastest-growing economies, the gauge of Asian shares has climbed 14 percent this year, with the weaker greenback also a factor, given that the index is denominated in dollars. Siva said she's counting on improving earnings and rising commodity prices to help Asian stocks “win” against the drag of geopolitical risks. After lifting their forecasts for corporate profits in Asia this year, analysts now predict the steepest earnings growth since 2010, data compiled by Bloomberg show.
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“If you've been following Asia-Pacific stocks for the past six years, your return-on-equity falls every single time,” Siva said. “Even just a small wiggle up is encouraging. I must admit, I'm quite excited.”
To contact the reporter on this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net.
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Christopher Anstey at canstey@bloomberg.net, Emma O'Brien
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