March Market Update 2024
In this market update, we discuss the strength of the equity rally this year, the end of ultra-easy monetary exceptionalism in Japan, and the investment case for gold.
Time To Go East – Equity Opportunities in Asia’s Big Three
Talk of an Asian Century has become more muted since the coronavirus pandemic. But there is little doubt that the global centre of economic gravity will continue to move east in the coming decades; and we believe that the big three regional economies – China, India, Japan – present equity investors with some enticing opportunities today. Clearly seizing these opportunities would not be without risk. But given how we expect these markets’ fortunes to interact, such as the potential for India and Japan to benefit from any travails in China, we believe that exposure to a combination of them within a varied portfolio offers particular appeal for investors.
India is the most enticing growth story of any major economy at present. However, as ever with such opportunities, the question is not only how much more growth is coming down the line – but how much we are willing to pay for it.
Japan, meanwhile, appears to be turning the page at last on its lost decades. Inflation seems to have risen to where policy setters want it and the Bank of Japan has finally moved to normalise the monetary regime in response. At the same time, and after a long, long wait, equity markets have regained their 1989 high, and corporate reforms are unlocking Japanese stocks’ pent-up value, suggesting that there is more runway for gains. But a longstanding corporate culture and a low-growth mindset cannot be shifted overnight and there will likely be bumps in the road.
Across the sea in China, the mood is more sombre. Chinese equities have been badly beaten by concerns about domestic and international politics and as the economy struggles to find a steady climb away from the pandemic era – and restructure its existing debt- and export-dependent growth model. Nevertheless, at these valuations, are Chinese stocks too cheap – and have they finally found a bottom from which to climb? Would a powerful stimulus (for which there is as yet no visibility) be the catalyst needed to shake the current, near-universal gloom?
Across Asia’s big three economies, we believe that a reform story, a growth story and a deep value story together represent a compelling way to invest in Asia’s future.
Click below for insights on each region.
If you would like to find out more about these themes or how you can take advantage of the current climate, please get touch with info@bedrockgroup.ch.
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