The time for Asian equities is now, says abrdn

22 May 2023
| By Jasmine Siljic |
image
image
expand image

China’s reopening is leading the attractive path forward for Asian equities, but investors should remain selective, according to abrdn.  

Speaking to Money Management, Christina Woon, abrdn’s Singapore-based Asian equities investment director, observed that China’s economic recovery would be led by domestic consumption. 

“Asia valuations are cheaper, so that’s why we think it’s quite an attractive time now. Conversely with the developed market, people are talking about recession and inflation [risks] which are much higher than what we see in Asia. We do see a difference in attractiveness,” she said. 

However, the growth trend was not tracking as quickly as the market initially expected. 

“We would argue that those expectations which came out of November last year with that sharp rise were a bit unrealistic. Things are coming along, just slower than everybody expected,” Woon explained. 

“We have to watch the trajectory of China’s reopening, with the risk on the expectation side. The market does tend to run ahead of itself sometimes, so that’s where you would have to be disciplined.”

Investors who were late to the Chinese recovery story towards the end of 2022 now had another opportunity but at a better time.

“You haven’t had the past six months of misses in expectations,” Woon said.

The domestic recovery narrative was not unique to just China, with Woon expecting a spillover effect to the rest of the region.

Premium Asia Funds Management previously encouraged investors to keep an eye out for Asian economies in the south-east, such as India, Vietnam, Malaysia, and Thailand.

Moreover, emerging markets were generally ahead of the inflation curve when compared to developed markets. 

Despite this, Woon recognised that Asia was not entirely insulated from the impact of a potential US recession.

“It is quite important to be selective as well. Some [assets] will still be affected by global macro-economic pressures,” she said.

The investment director reminded investors to choose equities that played into domestic consumption themes and led to long-term structural growth. 

Woon continued: “We are being a bit more cognisant about our exposure where there is more of a favourable demographic profile.” 

Markets with a younger population, including India and Indonesia, would continue to grow into a rising middle-income class and therefore more insulated from global recessionary risks, she said.

“That’s where that tailwind will support on the growth front, even if globally there might be some pressures on the economy,” Woon said.

Backing companies that had a dominant share in a growing industry would set investors up for steady growth. 

Tourism and technology hardware, particularly in the semiconductor space, were sectors riding the recovery journey.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago