The coming financial year spells narrowing opportunities across Asian markets. Despite 2021 exhibiting stifled fundamental growth leading to a record underperforming year and plummeting Asian indexes across the board, firms like HSBC still feel that many have been overeager in offloading their Chinese stock too early. Goldman Sachs strategist Alvin So anticipates an earnings revision downcycle for Asian markets as a whole. It is likely that China’s restrictive conditions for private enterprises combined with ongoing supply chain constraints will knock stock prices further during the close of 2021 and the beginning of the new quarter.
Asian Stocks On The Rise
The city of Hong Kong’s forecast for economic growth proves that as virus control measures ease up and cash stimulus is put into circulation, recovery is on the cards for specific Asian equity markets. Hong Kong projects gross domestic product growth of 6.5%, which is considerably higher than estimated earlier in the year when the range fell between 3.5% and 5.5%. While reaching the same level of market activity experienced before COVID-19 is unlikely, we believe travel, consumer goods, and construction will all rally in the first quarter of 2022. Manufacturing is currently in high demand, and Gabriel Lim, Hong Kong’s secretary of trade, is confident that external demand will hold.
India & China Facing Ongoing Economic Tension
Unlike most of South-East Asia, which is poised for strong growth, both India and China, Asia’s two larger economies, are likely to experience a slow pace throughout 2022. Brian Tan, a regional economist for Barclays, feels that supply chain problems will stifle growth until at least the second half of the year. The major bottlenecks for developed Asian markets are imported price inflation and monetary and fiscal policies changes over the next six to twelve months. There’s no question that China is facing an extremely challenging first quarter. Between the Evergrande crisis, power shortages, and the repercussions of the “common prosperity” drive, investment houses like Barclays expect a below-market consensus of just 4.7% growth with further contraction in property investment and property sales.
Japanese Markets In Upswing
Investment analysts have a bullish outlook for Japanese equities through the first quarter of 2022. Asset management giant Axa Investment Managers, which oversees $981 billion worth of assets, has selected Japan as a potential strong performer in the coming year. If Axa is correct, Japan may be on the verge of a quick come-back in the first quarter. With vaccination rates in Japan exceeding 80% of the populace and the state of emergency officially being declared over in September of 2021, widespread restrictions are expected to be lifted soon. AXA anticipates Japan’s economic growth to match the US and close strong at 3.5% in 2022. This spells opportunity during the first half with a possibility that the upswing will hold for longer.