Why the good times may be over for Asian equities

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Asian stock markets may have recovered most of their losses in the global stock rout, but a sustained rebound is unlikely, Capital Economics said in a note on Wednesday.

It noted that the MSCI Emerging Asia index is still down more than 5 percent from its late January peak, significantly underperforming both the MSCI Emerging Europe and the Latin American indexes, which are both up around 9-10 percent.

Since the stock rout, foreign investors have been net sellers of Asian stocks, with outflows estimated at more than $8 billion in February, the highest for a single month since 2013, Capital Economics said.

“We think that most indices will only manage to finish the year a little higher than they are now,” the note said. “Growth in most countries has now probably peaked, so a repeat of last year’s increase in expected earnings appears unlikely. What’s more, risk appetite is likely to wane as developed market equities remain under pressure.”