PERSPECTIVE3-5 min to read

Year Ahead 2024: Asian Equities

12/12/2023

Authors

Tom Clough
Fund Manager, Asian Equities

Drivers of Asian equity markets over 2023

We started the year with peak optimism on a Chinese consumer recovery only for markets to see disappointment as the China property market came under pressure. We saw strong sell-offs in consumer facing names as a result.

The year belonged to semi-conductors and India. Within semi-conductors, Korean and Taiwanese names were oversold amid heightened inventory fears and rebounded sharply. India saw strong government-led fixed asset investment, which allied with “China+1” narrative led to strong-rerating in manufacturing names.

Key themes expected to drive Asian markets in 2024*

The key issues that we believe will likely dominate markets in 2024 are:

  1. The continued softening of China’s property market and whether monetary and fiscal expansionary policies taken in 2023 can revive consumption.
  2. Secondly, whether unsecured credit growth in India will lead to an NPL cycle impacting growth.
  3. And finally, elections with Indonesia, India, Taiwan and, of course, the US all going to the polls to vote for their new leaders.

Key opportunities in 2024*

We continue to see Asia equities as an attractive asset class in 2024 and believe the above themes can be navigated through strong bottom-up stock picking in quality companies.

We would particularly call out a number of areas that the Asian equity team like:

  1. The first being selective world class Chinese exporters with strong global market share that are increasingly available at attractive valuations.
  2. Select Korean and Taiwanese semi-conductors, which are increasing their technology-lead against US peers and face less competition against Chinese peers given US tech sanctions. This consolidated sector offers durable high returns on capital.
  3. Many banks in the region that operate in oligopolistic markets are at attractive valuations. These are particularly ones that operate in countries with a deficit of savings and have consolidated their deposit market share allowing them to use low-cost funds to lend into the economy at high returns.

To conclude, we think 2024 will be a year which rewards investors who are disciplined and focused on fundamentals and bottom-up stock picking. We will continue to invest in companies which have attractive long-term fundamentals and valuation upside, which we believe is the keyway to generate durable and consistent returns for investors.

*For illustrative purposes only and does not constitute any recommendations to invest in the mentioned sectors/countries.

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Authors

Tom Clough
Fund Manager, Asian Equities

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