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Singapore. Bank Sarasin is betting on Western multinationals to tap growing demand in China and other emerging markets as their stocks offer better value than those of Asian companies, its chief investment officer said on Tuesday.

Burkhard Varnholt said Western companies with strong brands and an Asia focus would benefit from weaker domestic currencies even as their Asian competitors suffered from weak margins amid inflationary pressures at home.

“Coca-Cola, McDonald’s, Nestle, Unilever in our view are a much better risk-return play on the China and emerging markets growth story,” he said here.

McDonald’s is aggressively opening new restaurants in India and China and has seen strong same store growth and rising margins from its operations in Asia, the Middle East and Africa over the past five years.

Other picks by Varnholt, a former economics lecturer who has taught at MIT and New York’s Stern School of Business, include IBM and BP. Asian stocks have outperformed Western counterparts over the past year, with the MSCI Asia ex-Japan index gaining around 60 percent since the start of 2009 versus an around 23 percent rise in the S&P 500 index.

Varnholt said interest rates in developed countries were artificially low because of central bank intervention and would likely remain so in the foreseeable future, which meant equities remained attractive despite the run-up over the past year.

Using a discounted cash flow model, equities are undervalued relative to bonds by about 50 percent compared with the average of the past 35 years, he said.

Sarasin, which is majority owned by Rabobank of the Netherlands, advises clients with about $90 billion in assets.

Varnholt also remained bullish about Asian real estate investment trusts as they paid very attractive dividends relative to bond yields, citing Singapore-listed Suntec REIT as one of his larger property holdings.



Reuters