2016 Investment Outlook – Surfing The Value Wave

Date: December 11, 2015

Attractive value is evident.

Higher US interest rate concerns and slower China growth fears have resulted in some good value appearing. This is particularly evident within Asia where valuations have fallen towards 1.5x price to book1. When they have fallen this low, Asian equities have historically rallied an average 95% over the next five years2.

But, it will not be plain sailing. A “profit recession” – in which earnings results do not match forecasts – is a real risk. This risk appears discounted in many instances, but it remains.
The income story also looks to have further life given the likely slow pace at which US rates will likely rise.

In the following articles, our CIOs focus on 2016 opportunities and risks they see as they surf the value wave.

1As at 16 November 2015, the price to book ratio, as measured by Thomson Reuters Datastream, was 1.52X. When Asia’s price to book ratio falls into the 1.5 – 1.75x band, equities have rallied an average 95% over the subsequent five years.
2Source: Eastspring Investments as at October 2015 based on market data from January 1996 to June 2015 inclusive.

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