Business & Investment

This is what Asian equity investors are betting on in 2021

Thanks to a number of favorable government policies, you can benefit from investing in environmental, social, and governance reasons. Take renewable energy as an example. China, Japan and South Korea are all pushing for carbon neutrality this century, and the United States is preparing to be taken over by a climate-friendly president.

Asian equities could once again be a strong year, after a slight surpass in US peers in 2020 for the first time in three years, analysts said.

Asia’s outperformance continues in 2021, and cyclics are expected to catch up with technology stocks as optimism about vaccine deployments grows. According to a Bloomberg study, analysts predict that the MSCI Asia Pacific Index will rise by about 8% over the next 12 months, while the S & P 500 Index will rise by an estimated 7%.

Strengthening economic recovery in China and lower valuations in Asia compared to the United States and Europe also allow regional stocks to overcome the potential risks posed by new virus outbreaks, vaccine distribution hurdles and worsening US-China relations. It is an important positive factor that seems to be useful for.

“Asian equities will be the asset class of choice in 2021,” said Gary Dugan, CEO of Singapore’s Global CIO Office. “The region is particularly attractive because of its growth fundamentals and its ability to recover as soon as COVID problems become apparent.”

The S & P 500 sank the most since late October on Monday as investors evaluated the potential for a slower-than-expected economic recovery amid a global surge in COVID-19 infections. Still, Tuesday’s MSCI Asia Pacific Gauge hasn’t changed much.

Here are five themes that Asian equity investors say are key to their 2021 strategy:

Green is good

Thanks to a number of favorable government policies, you can benefit from investing in environmental, social and governance reasons.

Take renewable energy as an example. China, Japan and South Korea are all pushing for carbon neutrality this century, and the United States is preparing to be taken over by a climate-friendly president.

“Renewable energy is cheaper than ever,” said David Smith, portfolio manager at Aberdeen Standard Investments Asia. “China’s recent commitment to becoming a zero-emission greenhouse gas country by 2060 has given momentum to the incident.”

As China improves its climate goals, resources linked to solar and wind energy could be boosted. Meanwhile, India plans to source 40% of its electricity from non-fossil sources by the end of the decade, which should help companies in the sector.

Electric cars are still hot. BNP Paribas’ Energy Conversion Fund is one of those betting on shares in the electric vehicle supply chain, including Korean battery makers such as LG Chem and companies involved in hydrogen fuel cell technology. The focus is on Japan’s car inventories as Japan is preparing to phase out new petrol cars by the mid-2030s.

It’s a really valuable turn

Value shares have recovered many times over the last decade, but now investors are hoping for a stronger recovery in stocks that look cheap on indicators such as price-earnings ratio and price-to-book value ratio. With the exception of widespread blockades, the rebound of former economic stocks, which had been shunned by investors swarming in pandemic plays such as technology and healthcare, is expected to continue.

Investors seeking exposure to companies that profit as their business normalizes have access to banking, industrial and consumer discretionary stocks (heavyweight on the MSCI Asia Pacific Index). BlackRock Inc. The fund from UBS Asset Management touts Southeast Asian and Indian stocks as part of a recovery transaction guide.

Sectors are not the only ones that can benefit from rotation to value. Cheap markets also cannot be profitable.

Analysts said Singapore’s Straights Times Index, Singapore’s worst performing national gauge last year, could rise 10% in 2021 by signing the world’s largest regional trade deal at the end of last year. I presume.

Another market that has been shunned but loved: Japan. Foreign investors are returning to Japan’s cyclical heavy equity market, supported by Warren Buffett’s $ 6 billion bet on Japanese trading companies and expectations of policy changes under Prime Minister Yoshihide Suga. Is believed to be.

Technology is still your friend

I’m not saying that technology, the hottest trade in 2020, is being put off. This pandemic is accelerating trends such as e-commerce and telecommuting. In short, Taiwanese and Korean chip makers, Chinese internet names, and data center inventories are one of New Year’s favorites.

M & G Investments is one of the asset management companies investing in game content developers in Japan, South Korea and China.Hit game maker Nintendo Animal ForestLast year, it recovered 50%, but Sony, known for its PlayStation consoles, increased 39%.

Japan’s tech stocks are also set to benefit from the Kan administration’s digital reform agenda, which aims to transform the paper-rich and inefficient Japanese public sector.

However, there are some caveats to this trend. It’s a regulation. China has stepped up its scrutiny of billionaire Jack Ma’s Internet empire, launched an investigation into its exclusive practices at Alibaba Group Holding Limited, and ordered its affiliate Ant Group to review its business. ..

Concerns that antitrust scrutiny could extend beyond Mr. Ma’s company are squeezing shares in Alibaba and its rivals Tencent Holdings and food delivery giant Bidan.

Dividend drought should end

Dividend stocks are expected to come back in 2021 as companies loosen their purse strings. Another catalyst is to ease the regulatory restrictions imposed on bank payments to save capital during a pandemic.

Payments by lenders in Australia and Thailand could increase after the relevant restrictions were lifted, and the same is true for HSBC Holdings Plc and Standard Chartered Plc dividends after the UK relaxes the ban. .. Singapore’s banks, which have long been reputed to be generous in payments, could re-function if national regulators follow suit.

Mike Kerley, portfolio manager at Janus Henderson Investors, says it is “more than possible” to increase dividends in Asia by double digits.

Banks are not the only focus of investors here. According to Curly, material stocks such as Australian miners and consumer discretionary stocks, which are profiting from the commodity price boom, could increase.

China’s deleveraging is back

After a series of bond defaults at state-owned enterprises, China is once again focused on stabilizing debt levels and tightening liquidity in the financial system.

This is bad news for Chinese brokerage firms, a source of margin lending, and a barometer of equity market sentiment. Shenzhen Stock Exchange and other small cap listed companies that make heavy use of Shenzhen tech can also face selling pressure because they are vulnerable to liquidity leaving the system.

But beyond short-term distress, risk mitigation trends are likely to lead to improved asset quality in Chinese banks, boosting their share. Investors will monitor clues to their de-leverage plans at the National People’s Congress in China in March. — — Ishika Mookerjee and Abhishek Vishnoi / Bloomberg



This is what Asian equity investors are betting on in 2021

https://www.bworldonline.com/this-is-what-asias-stock-investors-are-betting-on-in-2021/ This is what Asian equity investors are betting on in 2021

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