According to global investment company abrdn, Asia holds significant potential for long-term investors with forecasts suggesting that the region’s earnings are expected to grow at twice the rate of the US.
Rene Buehlmann, abrdn chief executive officer of investments, believes the growth desynchronisation between the two regions will occur mid-year, around the same time as the Fed pivots to rate cuts, driven largely by slowing growth and moderating inflation.
“There is stronger earnings resilience in Asia and the region’s earnings for 2024 are expected to grow at twice the rate of the US,” he noted.
“We believe that investors are likely to reward Asia for its robust earnings growth and lower downgrade risks, and we expect key markets such as Korea, Taiwan, India, and Japan to be the main performers in Asia.”
In particular, Japan and India are pinpointed as being the “brightest spots” for investment opportunities, the investment chief executive said.
“The Indian economy is at the initial phase of a cyclical upturn, positioning it as one of the fastest-growing countries on a global scale.”
The nation’s bond market has delivered “substantial outperformance” compared to other asset classes due to significant reforms over the past decade.
Mr Buehlmann continued: “The Indian bond market outlook remains bright, and this is an opportune time for investors to position themselves in the market.”
Looking towards Japan, the investment firm highlighted attractive top-down and bottom-up factors underpinning the equities market as Japanese companies prioritise profitability and capital return.
“The Tokyo Stock Exchange’s efforts to enhance corporate profitability and governance have accelerated corporate restructuring, dividend payouts, and stock buybacks, all contributing to a positive outlook,” Mr Buehlmann added.
Similarly, on a recent episode of the Relative Return podcast, Matthew Haupt, lead portfolio manager of WAM Leaders, said India is experiencing much-anticipated growth, primarily driven by a pro-business government.
“The growth rates we’re seeing now are huge. It feels very much like China 20 years ago,” Mr Haupt said.
“GDP is probably about 7 and a bit per cent and could go higher. It really is the place to deploy capital right now.”
Japan too, he said, has switched gears to welcome investors. Once a closed shop, the country’s businesses are now welcoming foreigners.
“For investing, you really need a pro-investment government in place, and you’ve got that now in Japan and India,” he said, adding that because China has been “so anti-investment”, a lot of capital has found a home in those countries.
However, China will undoubtedly change its stance in order to compete with its neighbours, Mr Haupt said.
Market watchers across the globe have paid close attention to China’s economic reopening throughout 2023, given its potential to influence global economies.
The abrdn executive also expects a market recovery in China, with current valuations said to be attractive. Additionally, macroeconomic indicators demonstrate that targeted policy is producing positive results.
“A recovery in consumption services has commenced, with the potential to broaden out as consumers normalise their savings rate.
“A restocking cycle is in progress, expected to gain momentum in the coming months and we are optimistic that these developments could restore both corporate and consumer confidence, potentially leading to a sharp rebound in China.”
The firm holds high expectations for businesses that can adapt to shifting regulation and align with Chinese policy objectives. Specifically, areas such as digital innovation, green technology, and affordable healthcare will be at the forefront.
