With a continued global economic revival and lower oil prices supporting and reducing inflationary pressure in 2015, investment strategists are adopting a more optimistic outlook for the local equity market than for bonds.

Banking giant HSBC said on Thursday the equity market tends to deliver positive returns during the recovery phase, and Asia offers more compelling opportunities than other regions since its low valuation in emerging equity markets would be more attractive.

International investment management company BlackRock said it continues to prefer stocks over bonds and cash this year although it expects the volatility to rise.

While BlackRock shifts its attention to A shares, HSBC favors equities on the Chinese mainland within Asia.

By comparing return-on-equities versus price-to-book, Bill Maldonado, chief investment officer of Asia-Pacific at HSBC, said China is still one of the cheapest markets in the world on a valuation basis.

From a sector perspective, while asset managers have allocated much for defensive stocks, such as consumer staples and healthcare, over the past year which had pushed up their valuations, Maldonado said defensive stocks looked less defensive.

HSBC thought that cyclical stocks, such as technology and financials, would be more attractive in 2015.

French bank BNP Paribas said it expects the mainland housing market to rebound this year, and is holding a positive view of this sector, with particular optimism on the performance of Shimao Property, R&F Properties and KWG Property.

In the mainland banking sector, BNP Paribas is optimistic with Bank of China, Bank of Communications and China Minsheng Bank. It also holds a positive view of Ping An Insurance and New China Life Insurance in the insurance sector.

Although lower returns, generally, are expected for bonds than equities this year, BlackRock warned that bond yields would be further restrained with the likelihood of further US rate hikes, while HSBC remains positive on corporate bonds, especially in Asia. The outlook for renminbi bonds remains positive because of both the easing monetary policy bias from Beijing in 2015 and their low sensitivity to US interest-rate movements, HSBC said.

Contact the writers at gladdy@chinadailyhk.com and felix@chinadailyhk.com

(HK Edition 01/09/2015 page8)