PERSPECTIVE3-5 min to read

Watch: 2023 Asian Equities Outlook

With the broad market sell-off across the Asian region, our bottom-up proprietary stock indicators are signaling that stocks are now attractively valued, indicating that markets should be well-supported going into 2023.

16/12/2022

Authors

Belinda Sanith
Fund Manager, Asian Equities

What have been the key drivers over 2022?

2022 has been an extremely volatile market, with markets falling from peak levels geopolitical tensions high and inflation spiralling out of control.

The key issues that have impacted markets have been the aggressive hike in US interest rates, the unfolding Russia/Ukraine conflict, and the shift in focus of the Chinese leadership

away from economic growth and into national security and technological self-sufficiency.

What are the key themes expected to drive Asia markets in 2023?

Looking forward into 2023, the two key issues that will likely dominate markets are events in China, specifically the consolidation of power after the recent National Party Congress, as well as monetary policy from the US.

On China, with President Xi securing his third term, there are concerns that there may be greater policy intervention for private companies like we have seen in the internet sector while geopolitical tensions could escalate.

On monetary policy, there are increasing expectations from the market that the US Federal Reserve will reverse its policy stance and begin to cut interest rates as economic growth deteriorates.

That said, with the broad market sell-off across the Asian region, our bottom-up proprietary stock indicators are signaling that stocks are now attractively valued, indicating that markets should be well-supported going into 2023.

What areas of the Asia market does the team see opportunities going into 2023 and why?

Some of the opportunities that we see in the region are as follows.

In China, despite the heavy sell-off we have seen over the past year, we are not rushing to add to stocks here. We do not believe that the market is un-investible, but the risks of investing here have increased. We favour domestic Chinese companies in sectors which are aligned with long-term policy goals such as decarbonisation and innovation, but this must balanced by elevated valuations.

India should continue to be a relatively bright spot. The economy offers attractive long-term structural growth because of favourable demographics and ongoing infrastructure development, and where there are high-quality companies which can capitalise on this economic growth.

Elsewhere, in Australia, the equity markets continue to offer attractive investment opportunities, where companies possess strong corporate governance and face limited competitive threats. 

To conclude, given the uncertain market environment we are in, we continue to be disciplined and stick to our investment process, focused on our bottom-up stock selection, the long-term fundamentals of companies and being disciplined on valuations. Because this will be key in ensuring that we can generate consistent returns for our clients.  

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Authors

Belinda Sanith
Fund Manager, Asian Equities

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