Light equipment at the Guangzhou 2020 International Live Streaming Industry Expo on December 27, 2020.
Photographer: VCG via Getty Images
Photographer: VCG via Getty Images
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Na nou If their US counterparts beat 2020 for the first time in three years, Asian equities could experience another strong year, analysts say.
The better performance in Asia is expected to continue in 2021, and the cyclics are expected to catch on to technology stocks as optimism about the rollout of vaccines grows. Analysts, on average, predict that the MSCI Asia Pacific index will rise by about 9% over the next 12 months, compared to an estimated 8% increase for the S&P 500 index, according to Bloomberg surveys.
A strengthening economic recovery in the low valuations of China and Asia compared to the US and Europe are also the main positive factors that help local equities face potential risks from any new virus outbreaks, hurdles in vaccine distribution and the deteriorating ratios between China and America.
“Asian equities will be the best asset class in 2021,” said Gary Dugan, CEO of the Global CIO Office in Singapore. “Growth principles and the ability to recover quickly as Covid issues make clear make the region particularly attractive.”
The S&P 500 has sunk the most since late October Monday, as investors assessed the possibility of a slower-than-expected economic recovery amid a global increase in Covid-19 infections. Nevertheless, the MSCI Asia Pacific meter rose 0.2% on Tuesday.
Here are five themes that, according to Asian stock investors, are key to their 2021 strategy:
Green is good
Investing on environmental, social and managerial grounds should benefit from a range of favorable government policies.
Take, for example, renewable energy. China, Japan and Korea all insist on becoming this century carbon neutral, while the US prepares for a climate-friendly president to take over.
“Renewable energy has never been cheaper,” said David Smith, Aberdeen Standard Investments Asia’s portfolio manager. “China’s recent promise to be a net greenhouse gas emitter by 2060 has given the case a boost.”
Solar and wind energy supplies could be boosted as China improves its climate goals. Meanwhile, India plans that by the end of the decade, 40% of its power generation will come from non-fossil sources, which should help companies in space.
Electric vehicles are still hot. The BNP Paribas’ Energy Transition fund counts betting on shares in the supply chain for electric vehicles, which Korean manufacturers of batteries such as LG Chem Ltd. and enterprises involved in hydrogen fuel cell technology. Japan’s auto stocks are in focus as the country prepares phased out new petrol cars by mid-2030s.
It’s really value in turn
Value stocks have declined time and time again over the past decade, but this time investors are expecting a more robust increase in stocks that look cheap in benchmarks such as price-to-earnings or price-to-book multiples. Due to widespread closures, the downturn in equities in the old economy, which was avoided by investors flocking to pandemic plays such as technology and healthcare, is expected to continue.
Investors who want exposure to companies that benefit from normalizing business operations are picking up banks, industry and discretionary stocks – heavyweights in the MSCI Asia Pacific index. Funds from BlackRock Inc. to UBS Asset Management is the allotment of shares in Southeast Asia and India as part of their game book for recovery.
It is not just sectors that can benefit from value conversion; cheap markets also stand to win.
Analysts estimate that the Straits Times Index in Singapore, the worst performing national benchmark in Asia last year, could rise by 20% by 2021, bolstered by the signing of the world’s largest regional trade. agreement late last year.
Another market that was avoided but found love: Japan. Foreign investors are seen return to the cyclical heavy stock market in Japan, strengthened by Warren Buffett’s $ 6 billion bet on the country’s trading houses and expectations for policy changes under Prime Minister Yoshihide Suga.
These are the winners and losers in the 2020 stock market in Japan
Tech is still your friend
This is not to say that technology – the most popular trade in 2020 – is up and running. The pandemic has accelerated trends such as e-commerce and teleworking, which means Taiwanese and Korean chipmakers, internet names in China and stock centers in the new year are one of the favorites.
M&G Investments is among asset managers invests in game developers in Japan, Korea and China. Nintendo Co., the maker of the hit game Animal Crossing, rose 50% last year, while Sony Corp., known for its Playstation console, rose 39%.
Japan’s technology stocks are also set to benefit from the Suga administration’s digital reform agenda aimed at transforming the country’s paper-heavy and inefficient public sector.
That said, there is a caveat to this trend: regulation. China has stepped up investigation into billionaire Jack Ma’s internet empire, and has launched an investigation into alleged monopolistic practices at Alibaba Group Holding Ltd. started, and also has the affiliated Ant Group Co. to refurbish its operations.
Concern that will monitor the monitoring beyond what Ma’s companies shares in Alibaba and its competitors such as Tencent Holdings Ltd. and food delivery giant Meituan weighs.
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Dividend drought must end
Dividend shares are expected to return in 2021 as companies release their wallets. Another catalyst is the relaxation of restrictions on disbursements by banks to save capital amid the pandemic.
Payouts at Australian and Thai borrowers can grow to the removal of related restrictions, and the same applies to dividends at HSBC Holdings Plc and Standard Chartered Plc to the United Kingdom eased his ban. Singapore’s banks, which have long had a reputation for being generous with payouts, could be back in business once the country is there. regulator follows example.
The double-digit increase in Asian dividends “is more than possible,” said Mike Kerley, a portfolio manager at Janus Henderson Investors.
Banking is not the only space that investors are looking at here. Material stocks, such as Australian miners achieving a surge in commodity prices, as well as consumer discretionary stocks could see an increase, Kerley says.
China Deleveraging is back
To a string band defaults on state-owned enterprises, China is once again focusing on stabilizing debt levels and tightening liquidity in its financial system.
This is bad news for China’s brokers – a source of margin financing and a barometer of stock market sentiment. Companies listed on Shenzhen’s ChiNext board, and the other small capital stocks in the country, may also be under pressure as it is vulnerable to liquidity leaving the system.
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But outside the short term the pain, the decline in the reduction is likely to lead to better asset quality at Chinese banks, boosting their shares. Investors will oversee plans to reduce debt at March’s Chinese National People’s Congress meeting in March.
– With the help of Amanda Wang and Sofia Horta e Costa
(Estimates for updates in the second paragraph, the performance of the Asia index in the fifth paragraph.)