Asian equities are in the middle of a sharp rerating. Jefferies says the rally rests on five pillars.
A weaker U.S. dollar is the first. History shows that when the greenback falls, Asia benefits. Korea, China and Australia outperform, while materials and consumer stocks tend to lead.
Second is the expected Federal Reserve rate cuts and a steeper yield curve that gives added lift. Investors are pricing at least two to three cuts this year, with Korea and China again standing out. Banks and energy lag when this dynamic plays out.
Third, Asian firms with heavy U.S. exposure face trouble. Tariff uncertainty and de-globalization make domestically focused companies a safer bet.
Fourth, earnings momentum paired with analyst upgrades is rewarding. Jefferies notes that the combination of price momentum and revisions is one of the strongest factors in the region this year.
Finally, the bank flags defensive yield as a contrarian play. After a long bull run, investors may rotate into companies offering stability and dividends.
Country themes add depth: governance reforms in Japan, “Value-Up” policies in Korea, easing deflation in China, and small-mid cap growth in India all provide structural tailwinds.
The rally is broad-based but not indiscriminate.
The weak dollar and easier Fed policy are macro tailwinds, yet stock selection still hinges on who is exposed to the right geographies, revisions and governance trends.
Source :
https://www.investing.com/news/stock-market-news/jefferies-gives-5-reasons-why-asian-stocks-are-rallying-4237444
