US Fed bets reprice: China, Japan, South Korea and India look attractive as value investments in Asia rise
investment strategies in Asia. Corporate reforms in Japan and South Korea will support a value thesis, according to JPMorgan Asset Management and AllianzGI. Meanwhile, M&G Investment Management is attracted by near-record-low valuations for Chinese stocks.
Other haven plays are exporters and India’s domestic-driven equities. Having started the year brimming with hopes that the Federal Reserve’s easing will lift markets across Asia, multi-asset managers are now turning more selective under a drastically different environment. A hawkish pivot by the region’s central banks to protect their currencies has sapped the appeal of bonds, a traditional safe haven, putting the onus on stocks to deliver returns.
“Higher rates for longer do pose headwinds to capital flow into Asia," said Gary Tan, a portfolio manager at Allspring Global Investments. In this environment, “some domestic-focus sectors could be safe havens" such as Indian infrastructure stocks, Korean reform beneficiaries and China’s domestic consumer and utilities plays, he added. The latest market pricing indicates the Fed will start easing in November, a far cry from earlier bets for as many as six cuts in 2024.
Foreign funds have sold more than $7 billion worth of equities in emerging Asia excluding China so far in April, according to data compiled by Bloomberg, on track for the first outflow in six months. The outlook is even dimmer for currencies and bonds. A tighter-for-longer Fed means Treasuries will remain attractive over their foreign counterparts.
A Bloomberg gauge of local currency government debt in emerging Asia has lost 1.7% in dollar terms this year. MSCI’s Asia Pacific equity benchmark has gained about that amount. Here are some sectors in Asia that
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