Nikko AM head of Asian equities Peter Sartori said relatively stable political regimes in the Asian region are resulting in “meaningful economic gains in certain countries”.
“Asia’s moment is now for the taking and the next 12-24 months will be critical for shaping investors’ view, from one of a perpetually emerging Asia into one that has finally emerged,” said Mr Sartori.
“Indisputably, sound political systems are crucial for economic development and progress.”
Nikko AM said Singapore, for example, has had a single political party in power over an extended period of time and has only experienced a reduction in economic growth in five short periods in the past 53 years.
The asset manager said the Philippines and Indonesia have likewise generated sustained economic growth during long periods where political power was absolute.
Mr Sartori said India is now also well positioned to become a more politically stable country due to the Bharatiya Janata Party’s (BJP's) general election win in May.
According to Mr Sartori, this is the first time in 30 years that a single party has secured more than 50 per cent of the government.
Market expectations that the policies of the BJP and Narendra Modi will improve the living standards of the poorest and deliver sanitation to slums are high, said Mr Sartori.
Nikko AM chief global strategist John Vail said investors are also underestimating the growth in household net financial assets in Japan.
Mr Vail said the administration in Japan is also serious about improving corporate governance as one of its economic stimulus policies.
“Foreign investors will realise that corporate governance in Japan is a very serious trend, along with the recent surge in profit margins, and [they will] gain confidence in the country,” said Mr Vail.
Global risk markets are, however, likely to recover from the recent disruption due to the Ebola outbreak, the sanctions imposed on Russia and plummeting oil prices.
“Our target for the S&P500 is a slight rise above its recent level and [this] continues to look quite achievable once some of the panic surrounding these issues calms,” said Mr Vail.
