Asian equity markets to rebound in the second half, says Citi

The US bank suggests adding risk to portfolios as defensive plays start to look overvalued, but recommends waiting until after the earnings season which is likely to bring more market weakness.

Using football analogies, Citi says the game of equity markets in Asia ex-Japan has reached half time and gets 10 minutes to contemplate what to do in the second half. Looking at the weak performance, particularly in May, few will be defending the gains so far, so the second half is more likely to be about beating the opponent called benchmark, the bank argues in a research note.

The market will decrease further in the coming weeks but will rebound after the summer, helped by attractive valuations and abating concerns about global growth. Risk tolerance will be restored and liquidity will be going back to real estate, insurance and industrials, which investors stayed away from...

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