Light equipment at Guangzhou 2020 International Live Streaming Expo Industry from December 27, 2020.
Photographer: VCG through Getty Images
Photographer: VCG through Getty Images
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After narrow beating its US counterparts for the first time in three years in 2020, Asian stocks could see another strong year, analysts say.
Asia’s superior performance is seen to continue in 2021, with cyclical thresholds expected to catch up. up to technological stocks as optimism about vaccine launches increases. Analysts predict on average that the MSCI Asia Pacific index will increase by about 9% over the next 12 months, compared to an estimated 8% gain for the S&P 500 index, according to Bloomberg polls.
A strengthened economic recovery in China and Asia’s low assessments of the US and Europe are also key positive elements that are helping regional stocks overcome the potential risks posed by any outbreak of the new virus, barriers to vaccine distribution and worsening relations. Sino-US relations.
“Asian equities will be the preferred asset class in 2021,” said Gary Dugan, executive director at the CIO’s Global Bureau in Singapore. “The fundamentals of growth and the ability to return quickly, as Covid’s problems are clear, make the region particularly attractive.”
S&P 500 it sank the most since the end of October on Monday, while investors assessed the possibility of a slower-than-expected economic recovery amid a global rise in Covid-19 infections. Even so, the MSCI Asia Pacific gauge rose 0.2% on Tuesday.
Here are five topics that Asian stock investors say are key to their 2021 strategy:
Green is good
Investments for environmental, social and governance reasons should benefit from a number of favorable government policies.
Take renewable energy, for example. China, Japan and Korea are striving to become carbon-neutral in this century, as the US prepares for a climate-friendly president.
“Renewable energy has never been cheaper,” said David Smith, portfolio manager at Aberdeen Standard Investments Asia. “China’s recent commitment to be a zero emitter of greenhouse gases by 2060 has added impetus to the case.”
Actions related to solar and wind energy could increase as China improves its climate goals. In the meantime, India intends to have 40% of its energy production from non-fossil sources by the end of the decade, which should help companies in that area.
Electric vehicles are still hot. BNP Paribas’ energy transition fund is one of them betting on stocks in the electric vehicle supply chain, which includes Korean battery manufacturers such as LG Chem Ltd. and companies involved in hydrogen fuel cell technology. Japan’s car stocks are concentrated as the country prepares gradually eliminate new petrol cars by the mid-2030s.
It really is the turn of value
Stock stocks have remained and recovered countless times over the past decade, but this time, investors expect a more robust stock growth that looks cheap on measures such as earnings or multiple price accounting. With the exception of large-scale foreclosures, stocks are expected to continue to recover from the old economy, which has been shunned by investors facing pandemic games such as technology and healthcare.
Investors who want exposure to companies that will benefit as business normalizes raise banks, industry and consumer discretionary stocks – heavyweights in the MSCI Asia Pacific index. Funds from BlackRock Inc. at UBS Asset Management are promoting actions in Southeast Asia and India as part of their recovery playbook.
Not only sectors could benefit from value rotation; cheap markets have something to gain.
Analysts estimate that the Straits Times Index in Singapore, Asia’s best performing national gauge last year, could gain 10% over 2021, boosted by the signing of the world’s largest regional trade pact at the end of last year.
Another market that has been avoided, but which is receiving love: Japan. We see foreign investors returning to Japan’s highly cyclical stock market, backed by Warren Buffett’s $ 6 billion bet on the nation’s trading houses and expectations for policy changes under Prime Minister Yoshihide Suga.
These are the winners and losers on the Japan 2020 stock market
Technology is still your friend
That doesn’t mean the technology – the hottest trade of 2020 – is going back-burner. Pandemic has accelerated trends such as e-commerce and teleworking, which means Taiwanese and Korean chip makers, the name of the Internet in China and data center stocks are among the favorites in the new year.
M&G Investments is one of the asset managers investing in game content developers in Japan, Korea and China. Nintendo Co., the maker of the hit game Animal Crossing, rose 50 percent last year, while Sony Corp., known for its Playstation console, rose 39 percent.
Japan’s technological actions are also set benefit from the Suga administration’s digital reform agenda, which aims to transform the paper’s inefficient public sector.
That being said, there is a focus on this trend: regulation. China has stepped up control over billionaire Jack Ma’s Internet empire by launching an investigation into alleged monopolistic practices by Alibaba Group Holding Ltd. and also ordered affiliate Ant Group Co. review of its operations.
Concerns about antitrust control extend beyond Ma companies weighed on the shares of Alibaba and its rivals such as Tencent Holdings Ltd. and food delivery giant Meituan.
China is fining Alibaba, a Tencent unit under antitrust laws
The dividend drought should end
Dividend stocks are expected to return in 2021 as companies loosen their purse strings. Another catalyst is the relaxation of regulatory boards placed on payments by banks to conserve capital against the background of the pandemic.
Pay at Australian and Thai creditors could grow after lifting of the related restrictions and the same applies to dividends from HSBC Holdings Plc and Standard Chartered Plc after the United Kingdom eased his ban. Banks in Singapore, which have long had a reputation for being generous with payments, could return to the game with the country the controller follows the example.
Double-digit increases in Asian dividends “are more than possible,” said Mike Kerley, portfolio manager at Janus Henderson Investors.
The bank is not the only space that investors are looking for here. Material stocks, such as Australian miners earning from a commodity price boom, and consumer discretionary stocks could see an increase, Kerley said.
The withdrawal from China has returned
After a series of connections implicitly in state-linked firms, China is once again focusing on stabilizing debt levels and tightening liquidity in its financial system.
This is bad news for Chinese brokerages – a source of margin financing and a barometer of stock market sentiment. Companies listed on the ChiNext Board in Shenzhen, as well as other small-cap stocks in the country, may also face selling pressures as they are vulnerable to liquidity leaving the system.
China tells inefficient firms to strengthen or prepare to fail
However, beyond the short term pain, the ridiculous trend is likely to lead to better asset quality in Chinese banks, giving a boost to their actions. Investors will follow clues to contingency plans at the annual meeting of China’s National People’s Congress in March.
– With the assistance of Amanda Wang and Sofia Horta e Costa
(Estimated updates in the second paragraph, the performance of the Asia index in the fifth paragraph.)