Asian Stocks Outlook | Goldman Sachs Predicts Further Decline in Asian Equities, Recommends Selling on Rallies

Morgan Stanley reported that due to soaring oil prices and increasing stagflation concerns, Asian stock markets are expected to decline further. It recommends selling during this week’s rally in Asian stocks.

MS pointed out that under unfavorable conditions, the Asian markets could fall to the bank’s pessimistic target, which is 15% to 20% below current levels.

MS stated that Brent crude oil is trading at $111 per barrel and is moving toward the unfavorable scenario target of $120 to $130. Other factors include the Federal Reserve’s decision to keep interest rates unchanged amid potential stagflationary macroeconomic conditions, and the attack on Qatar’s Ras Laffan liquefied natural gas facility, which is crucial for Asia’s LNG exports.

The bank noted that compared to other regions, Asia is more vulnerable to ongoing supply disruptions of oil, LNG, and other agricultural and industrial inputs, including ammonia, urea, helium, and sulfur.

Japan, Korea, and Taiwan Stocks Surge to New Highs Then Plunge

Earlier this year, Asia-Pacific stock markets performed strongly, with Japan, South Korea, and Taiwan repeatedly hitting new highs. However, following military actions by the US and Israel against Iran, and Iran’s blockade of the Strait of Hormuz, risk aversion surged, global stock markets declined, with South Korea’s market dropping over 12% in a single day. Meanwhile, Japanese and Hong Kong stocks also retreated simultaneously.