Value is seen in consumer discretionary and technology services stocks, with investors likely drawn to markets dependent on local or regional demand. Financial stocks, on the other hand, along with stocks in South Korea and Taiwan, are seen by strategists as the most vulnerable to a US downturn.
Money managers are on the hunt for the next big deal after spending most of the year collecting technology, chips and a select few Chinese stocks. The outlook for the dollar and the Chinese economy was among the biggest jitters as Asian stocks sought to recover from their biggest annual decline in more than a decade.
Tai Hui, chief Asia market strategist at JPMorgan Asset Management, said: “General economic trends on US deceleration, China acceleration and Asia domestic demand story A” was clear. “If there is any risk aversion, it is not going to translate into a stronger dollar and that is good for emerging market and Asian assets.”
South Korean and Taiwanese stocks are at risk of falling behind after outperforming most of their Asian peers year-to-date. That’s because the US – the biggest market for heavyweights Taiwan Semiconductor Manufacturing Co and Samsung Electronics – is facing slowing growth, turmoil banks and the debt ceiling deadlock. That’s even as tech stocks benefit from lower interest rates. Taiwan and the information technology sector are more sensitive to U.S. economic growth and financial conditions than most other regions in Asia Pacific, with the exception of Japan, according to Goldman Sachs Group. Inc.
Source: Goldman Sachs report
The Herald said exporters linked to the automotive, smartphone and television supply chains are looking vulnerable. van der Linde, head of equity strategy for Asia-Pacific at HSBC Holdings Plc. “We think there is a rotation away from Korea and Taiwan to India,” he said.
Global funds net bought about $2.5 billion in Indian stocks this quarter while selling the same amount of Taiwanese shares, according to data compiled by Bloomberg. India’s stock benchmark is up more than 4% over the period, beating all of its major peers in Asia, and the country’s economy is forecast to grow by nearly 7% in fiscal 2023.
Sell Finance, Buy Consumption
At the other end of the spectrum, lenders like National Australia Bank Ltd. and DBS Group Holdings Ltd. are facing increasing margin pressure when raised nearing the end of its tightening cycle. This could put an end to two years of outperforming the financial sector over consumer stocks and most other sectors in the region.
Among sector picks, funds are leaning toward consumer stocks amid expectations of rebounding local demand and a rebound in China. Invesco’s David Chao said staples are a good option to ride out volatility until the Fed decides to raise rates.
After that, Asia “will lead the world in terms of the cyclical recovery,” said the global market strategist, and discretionary stocks, especially travel stocks in Southeast Asia and Japan is one of his top picks. For JPMorgan’s Hui, Asian tech services stocks such as internet names and e-commerce are in a better position than hardware stocks. take refuge according to local or regional demand.
In Southeast Asia, “we are weighing on Indonesia. We see earnings growth of 17%, which is pretty strong at this point. We like banking and technology,” said Evelyn Yeo, head of Asia investments at Pictet Wealth Management. “China and India are the two growth engines of Asia and appear to be on track for growth.”