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While developed and emerging market stocks have been locked in a close race so far this year, with the MSCI World Index and MSCI Emerging Markets Index up 8 and 10 percent, respectively, strategists say Western equity markets are likely to outperform their Asian peers in 2012.
“Earlier this year…there was a short, tactical window where Asia might outperform the developed markets – well they have just barely done that, and now we think that even this tactical window has closed,” Ajay Kapur, Head of Equity Strategy, Asia, at Deutsche Bank said in a report.
Kapur says the large gap between U.S. and Asian “economic surprises”, which made investors more cautious about investing in the U.S. late last year, has converged.
“The economic surprises in the U.S. were at record highs late last year, while those in Asia were exceptionally low. (Now) both regions show economic surprise close to zero,” he said. “So, the advantage that Asian equities enjoyed is gone.”
Major markets in the West including the United States' S&P 500 and Germany’s DAX have risen 8.7 and 11.4 percent, respectively since the start of 2012. While within the emerging markets, China’s Shanghai Composite and India’s Sensex have gained 8.6 and 11.2 percent each, year-to-date.
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