On Nov 9, Asia’s stocks gave up some of their early gains after breaching a decade-old record, early in the trading session. The Nikkei 225 also raced passed its highest level in nearly 25 years before ending the day lower, likely due to profit taking. Despite a slightly underwhelming outcome for Asia’s markets by the end, the day’s events still serve to illustrate the strength in the region’s equities.
A combination of factors, including rapid improvement in the global economy, encouraging earnings and soft monetary policies has been boosting Asia’s stocks over the current year. Given that most of these factors remain in place, it makes good sense to bet on stocks from Asia at this time.
Earnings Growth, Global Economic Recovery Powering Asia’s Stocks
During the year, key economies across the world. The largest contributions have come from tech stocks, with the likes of Alibaba Group Holding Limited (BABA) and Tencent Holdings Limited (TCEHY), providing the biggest impetus to the MSCI Asia Pacific Index. The index briefly broke above the record set during November 2007, before closing the day only 0.2% higher.
Even so, the index is still up 27.2% year to date, ahead of several of the world’s key benchmarks. For instance, the S&P 500 has gained around 16% during the same period while the STOXX 600 has increased nearly 20% in U.S. dollar terms.
Further, the recovery in developed economies has benefited the export oriented countries of Asia. According to Bloomberg, companies listed on the MSCI Asia Pacific index are projected to post average earnings growth of 13% during the current quarter. This is nearly twice as much as projections for the S&P 500, despite the fact that the index has breached several milestones this year.
Hang Seng, Kospi, Nikkei Among Region’s Big Winners
The Nikkei 225 briefly moved above the 23,000 mark for the first time in 25 years before ending the day 0.2% lower. Encouraging earnings results and a resilient economy have helped Japan’s benchmark index breach multiple records over this year. The softening of the Yen and prime minister Abe’s resounding victory in the recently held snap poll have added to the factors powering the index consistently higher. Meanwhile, other benchmarks across the region, ranging from India to South Korea are also lingering close to record levels.
On Tuesday, the S&P/ASX 200, Australia’s benchmark index, moved above 6,000 for the first time since the beginning of the 2008 crisis. Additionally, Hong Kong’s Hang Seng is up nearly 33% year to date and has emerged as Asia’s best performing index. Meanwhile, South Korea’s benchmark Kospi index has gained 26% year to date.
Despite temporary reverses, Asia’s stocks have had an exceedingly good run this year. A global economic revival has powered strong earnings growth which has helped the region’s indexes set multiple records over this period.
Investing in Asia’s stocks represents a profitable opportunity at this point. However, picking winning stocks may be difficult.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
China Petroleum & Chemical Corporation SNP or Sinopec with its head office in Beijing, China, is one of the largest petroleum and petrochemical companies in Asia.
Sinopec has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. The company has expected earnings growth of 59.1% for the current year The Zacks Consensus Estimate for the current year has improved by 5.8% over the last 30 days.
Canon Inc. CAJ is an industry leader in professional and consumer imaging equipment and information systems. The company is based in Tokyo, Japan.
Canon has a VGM Score of B. The company has expected earnings growth of 49.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 20.3% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
PetroChina Co. Ltd. PTR is the largest integrated oil company in China.
PetroChina has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.3% over the last 30 days.
POSCO PKX is one of the largest steel producers in the world on the basis of output. The company is based in Pohang, South Korea.
POSCO has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 8.4% over the last 30 days.
Wipro Limited WIT is an information technology and consulting company with worldwide operations. The company is based in Bengaluru, India.
Wipro has a Zacks Rank #2 and a VGM Score of B. Its earnings estimate for the current year has improved by 1.3% over the last 30 days.
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