Stocks in Asia gained on Monday on hopes Europe was making progress towards a fiscal union, but a number of experts told CNBC the EU agreement hadn`t changed anything fundamentally for the markets, which were likely to remain highly volatile.
"The markets signals continue to be macro driven, all asset classes will continue to be highly correlated which means the markets are uninvestable and are untradable," Viktor Shvets, Head of Research and Strategy at Samsung Securities Asia said on Monday.
Shvets believes the strong correlations between asset classes, which have led to simultaneous selloffs in everything from stocks to commodities in recent months, are set to continue. "The same factors that caused correlation to be high through 2010-11 are still with us," he said, pointing to developed world debt problems, China's unbalanced growth, and a gradually diminishing Japan.
In such an environment, Shvets believes investors should buy safer, blue chip stocks, which have strong cash flows and pay dividends. According to him, the best way to play volatility is by adding risk during times when markets are selling off and reducing risks when markets recover.
George Boubouras, Head of Investment Strategy and Consulting at UBS Wealth Management in Sydney said investors should remain highly diversified across all asset classes. But he also said there were opportunities for investors willing to take risks.
Boubouras recommends Australian banking stocks, which have outperformed the broader SandP/ASX 200 this year and which, he said, offered a 65-70 percent dividend payout ratio.
"When you get a multiple and a dividend yield in this sort of scenario, it really is quite unique. The payout ratios are quite high in this market and people should be cognizant of that," Boubouras added.
Copyright 2011 cnbc.com
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