China growth worries appear overdone
The growth outlook in the region is conflicted by two opposing views - improving optimism about the US recovery, but near-term worries over China's growth on signs of policy easing delays in some cases (for example, property, reserve requirement ratio (RRR)) and data disappointments. In general, Citi analysts think those China growth worries are overdone - most Asian central banks appear to feel the same, prompting "relatively" more hawkish or dissipating dovishness.
Going forward, Citi analysts see greater risk towards Asian foreign currency weakness, and heavily owned fixed income markets may be relatively more vulnerable.
Looking at the performance of Asian equity markets, it appears that average amounts of equity issuance tend to be rewarded. Some of the reasons why issuance has typically not led to underperformance is that some equity issuance is viewed as a prerequisite for growth and hence not a bad thing. Secondly, given that the retail investor is a major driver of these markets, holding periods mean most are renters of equity rather than "owners".
Where equity issuance is a useful tool is when it is used to see where we are in the equity cycle. Low levels of issuance are a general positive for equity investors as they signal little competition for capital. As equity issuance approaches 2.5% of issuance relative to M3 (a wider measure of money in the economy), Citi analysts believe we may be fast approaching a top in the equity market. But with issuance relative to M3 currently at 1%, we appear a long way off from those levels.