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In 2022 global investors are faced with a new set of challenges including slower growth, monetary policy tightening and lower asset returns even as the pandemic persists amidst the emergence of new Covid variants and geopolitical risks are heightened. Against this backdrop, Asian markets offer pockets of investment opportunities, supported by faster economic growth when compared with developed markets and attractive earnings and valuation profiles. Asian equities, in particular, stand out in this environment after being unloved in 2021.
In the coming years we see Asia leading global growth and cementing its position as a greener and more technologically advanced economic powerhouse amidst demographic shifts, policy reforms and rising innovation. However, Asian assets continue to be underrepresented in global portfolios, a situation that is ripe for change. At HSBC Asset Management, we have been helping our clients navigate various market cycles and connecting them, for decades, to underexplored opportunities in the region – catalysing the inevitable transition to Asia.
Focus on Asian equities
Asian economies continue to strengthen
We see Asia’s growth recovery strengthening in 2022, enabling a virtuous and sustainable economic cycle in the region
In contrast to the tightening cycles in developed markets, China is on the easing path and its policy tilt is expected to be the key driver of the regional recovery
Finally, Asia’s stronger footing, underpinned by its exports, capex and productivity growth, can help the region weather exogenous shocks
Asian economies gain strength on exports, capex & productivity
The performance figures displayed in the above relate to the past and past performance should not be seen as an indication of future returns.
Source: Refinitiv, HSBC Asset Management, January 2022. For India, the year runs from 1 April to 31 March the following year.
Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only.
Asia expected to lead 2022 earnings growth
Asia ex-Japan equities are trading at discount to their US and European counterparts, while providing higher earnings growth
Forecasted earnings growth for Asia ex-Japan equities averages 11.2% in 2022, compared with 7.3% and 2.7% for US and European equities for the same period
At a country level, China stands out within the region as the only economy where policy is easing, which should provide a buffer against the rate tightening cycles elsewhere
Asian equities offer higher EPS growth at less demanding valuations
The performance figures displayed in the above relate to the past and past performance should not be seen as an indication of future returns.
Source: Refinitive, HSBC Asset Management, January 2022.
Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only.
Pandemic-induced digital acceleration
Tipping point - The pandemic has fast-tracked the adoption of the technology in Asia with an increasing number of consumers moving to online channels, accelerating the digital transformation of business models and the supply chain in the region. Innovation and manufacturing prowess in high tech space have also been significantly upgraded amidst the rising need for technological self-sufficiency.
Digital adoption - In Asia, the advent of the 5G mobile technology is supported by its highly adaptable digital consumer base and government investments in “new infrastructure”, including autonomous driving, advanced healthcare, fintech and the Internet of Things (IoT). Amidst multiple driving forces, 5G subscriptions in region are expected to rise rapidly to about 1.2 billion in 2024, from less than 50 million in 2020.
Secular trend - In addition to the rise of 5G, Taiwan and Korea are home to some of the world’s largest and leading hardware and semiconductor manufacturers. These export-driven economies will likely continue to benefit from the secular trend of digitalisation – an important investment theme that could generate alpha for investors for years to come.
Asia-Pacific: 5G subscriptions (2019-2024)
Source: GlobalData’s 2020 forecast. The information provided does not constitute any investment recommendation in the above mentioned asset classes, indices or currencies. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecast, projection or target. For illustrative purpose only.
About HSBC’s Asian equity capabilities
Note: Representative overview of the investment process, which may differ by product, client mandate or market conditions.
The Funds invest mainly in Asian equities (excluding Japan).
The Funds are subject to the risks of investing in emerging markets and smaller companies.
The Funds may invest in onshore Chinese securities through various market access schemes and China A-shares Access Products. Such investments involve additional risks, including the risks associated with China’s tax rules and practices.
Because the Funds’ base currency, investments and classes may be denominated in different currencies, investors may be affected adversely by exchange controls and exchange rate fluctuations. There is no guarantee that the currency hedging strategy applied to the relevant classes will achieve its desired result.
The Funds may invest in financial derivative instruments for investment purpose which may lead to higher volatility to its net asset value.
The Funds may pay dividends out of capital or gross of expenses. Dividend is not guaranteed and may result in capital erosion and reduction in net asset value.
The Funds’ investments may involve substantial credit, currency, volatility, liquidity, interest rate, tax and political risks. Investors may suffer substantial loss of their investments in the Funds.
Unit trusts are NOT equivalent to time deposits. Investors should not invest in the Funds solely based on the information provided in this document and should read the offering document of the Funds for details.
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We see Asia’s growth recovery strengthening in 2022, enabling a virtuous and sustainable economic cycle in the region
