Seeking opportunities in the Asia-Pacific surge? Check out analysts’ recommended prime investment markets for 2024

Seeking opportunities in the Asia-Pacific surge? Check out analysts’ recommended prime investment markets for 2024

Lloyd Jacobs
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In 2023, Asia-Pacific markets soared to unprecedented heights, led by Japan’s Nikkei 225, which emerged as the top-performing equity index. Forecasts indicate that the region is poised to sustain this impressive momentum into the upcoming year.

In 2024, analysts speaking to CNBC predict that India, Japan, and Vietnam will lead as the top-performing markets in the Asia-Pacific region for the first half of the year. Here’s their reasoning behind this forecast.

1. India

India’s stock market emerged as a favored choice in the region last year, with investors showing optimism about the country’s long-term potential.

The Nifty 50 index, the benchmark, surged by 20% in 2023, setting numerous record highs.

India’s economic growth is anticipated to outpace other major Asian economies in 2024. The International Monetary Fund (IMF) forecasts the country’s real GDP to expand by 6.3% this year, mirroring the 2023 rate.

The country’s growth prospects have been a significant driver for its stocks, particularly when compared to China, the region’s largest economy, which faced challenges in achieving its 5% GDP growth target for 2023.

Strong earnings, expected interest rate reductions, and increased involvement from domestic investors have all contributed to the Indian stock markets’ positive performance. These factors are likely to fuel the Nifty 50’s ongoing record-breaking run into the following year.

The upcoming general elections in 2024 pose a potential variable. Strategists at J.P. Morgan stated that if the ruling Bharatiya Janata Party retains power, they foresee the Nifty 50 reaching 25,000 next year.

This target reflects a more than 15% increase from the index’s recent closing figure of 21,710.

Nevertheless, JPM cautioned that unforeseen results in the general elections, combined with global economic downturns, geopolitical tensions, higher oil prices, or increased domestic unemployment, could result in the Nifty dropping to 16,000.

2. Japan

The Nikkei 225, Japan’s leading stock index, outshone its peers in Asia last year, and analysts foresee further potential in the country’s equity markets throughout 2024.

Japan’s stock surge witnessed the blue-chip Nikkei 225 rising by 28% and the broader Topix concluding 25% higher.

The country’s stocks were bolstered by robust earnings and mounting optimism that the Bank of Japan might eventually terminate its prolonged ultra-loose monetary policy, which has maintained near-zero interest rates for decades.

Masashi Akutsu, a strategist at BofA Global Research, anticipates the momentum in Japan’s markets to persist well into 2024, highlighting an increase in foreign investments.

BofA strategists envision the Nikkei 225 reaching 37,500 by the end of 2024, while the current index hovers around 33,464.17.

Akutsu highlighted technology and banks as BofA’s top selections for the following year, as these sectors provide a balanced portfolio comprising both growth and value-oriented stocks. This strategy aligns with market expectations of the Bank of Japan steering away from its ultra-loose monetary policy.

Despite the Bank of Japan wrapping up its last meeting of 2023 with interest rates remaining in negative territory at -0.1%, and maintaining the yield curve control policy, challenges persist due to a sluggish economy and moderating inflation. The BOJ may face obstacles in unwinding its ultra-loose stance. Investors will keenly observe the annual spring wage negotiations in the upcoming year for indications of meaningful wage increases.

3. Vietnam

Similar to India and Japan, Vietnam has reaped benefits from the “China plus one” strategy, where companies diversify investments to reduce dependence on China.

The country anticipates a GDP growth between 6% to 6.5% in 2024, driven by robust imports, exports, and strengthened manufacturing activities.

Optimism in the Vietnamese market led to over a 14% surge in foreign direct investments last year compared to 2022. Approximately $29 billion in foreign direct investments were pledged to Vietnam from January to November last year, according to LSEG data.

Yun Liu, ASEAN economist at HSBC, highlighted that China contributed half of the new FDI inflows into Vietnam this year, illustrating the allure of the Southeast Asian nation as an emerging manufacturing hub.

Andy Ho, chief investment officer of VinaCapital Group, emphasized that it’s an opportune moment for investors to enter Vietnam’s stock market. Ho pointed out that valuations stand at an attractive range of about 11 to 12 times earnings for 2023, marking a 20% to 25% discount to the regional average, making Vietnam a promising market over the next 6 to 12 months.

Ho highlighted the increased average daily trading volume in Vietnam, rising from $500 million a year ago to approximately a billion dollars daily. He identified investment prospects in consumption, healthcare, and real estate sectors.

“People are starting to realize that with significant liquidity, banking it with uninteresting interest rates isn’t appealing. They’re exploring alternative investment options,” Ho explained.

Positive sentiments toward Vietnam’s e-commerce sector should resonate with investors, according to Tyler Nguyen, Vice President and Head of Institutional Equity Sales at Maybank Securities Vietnam.

Nguyen highlighted consistent annual growth ranging between 20% to 30% in the e-commerce sector, noting that e-commerce comprises merely 2-3% of retail sales.

Regarding Vietnam’s potential inclusion in MSCI’s roster of emerging market economies, Nguyen indicated that the developing economy is still in its early stages. He expressed optimism about potential positive developments possibly emerging by 2025.

Is China still worth a play?

Jefferies mentioned in a note that Chinese consumer confidence remains subdued post-pandemic due to factors like elevated youth unemployment, debt concerns, and instability in the property sector, prompting consumers to adopt more cautious spending habits.

Despite this persistent pessimism in the Chinese market, analysts have identified areas showing promise.

Jefferies anticipates a return to normalized sales growth in the upcoming year and advises investors to focus on specific consumption sub-sectors like beer and sportswear. Maybank also favors the consumer sector along with China’s “new economy” segment.

Moreover, Jefferies expresses optimism regarding China’s healthcare sector, suggesting that investors consider selectively choosing stocks positioned for better-than-anticipated growth and margin expansion.

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Lloyd Jacobs
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Lloyd Jacobs

Seattle-based software engineer Lloyd Jacobs, driven by passion and curiosity, excels in coding, UI design, and backend optimization, blends tech expertise with nature exploration and mentoring. More About Me

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