Despite slowing global growth and monetary policy tightening, Asia looks better placed than other regions given its domestic demand resilience. “We turn slightly more constructive on North Asia, based on our modest earnings outlook for the region, largely led by China. In ASEAN, the ongoing reopening impulse should drive a greater uplift in the services sector. This could partly cushion the slowdown in trade exports but still causes us to moderate our previous South Asia tilt,” the firm said.
“China’s risk/reward profile has turned more attractive as policy is easing and regulatory concerns appear overdone, with upside from a faster-than-expected reopening,” the firm added.
“Likewise, we upgrade Hong Kong from underweight to neutral as its lackluster economic growth now looks priced in and its reopening is ahead of mainland China. We have also upgraded Taiwan from neutral to overweight. Taiwan’s relative valuation is compelling while the growth drag from the global semis/hardware downcycle appears largely discounted by the market,” the asset manager continued.
“However, we downgrade South Korea from neutral to underweight as valuations appear unattractive against a deteriorating corporate earnings backdrop. We continue to be underweight in India given its extended valuations and weak corporate profitability due to elevated inflationary pressures,” the firm said.
“Within ASEAN, Singapore and Indonesia are our preferred markets. We retain our positive view on Singapore based on its relative earnings resilience. This is underpinned by a solid outlook across Singapore’s financials, property and transport sectors,” the firm continued.
“We upgrade Indonesia from neutral to overweight as private consumption remains resilient and is likely to sustain its relatively strong GDP growth. We have turned less bearish on the Philippines and upgrade this market from underweight to neutral,” the firm said.
“In contrast, we reduce our overweight on Thailand and Malaysia,” the firm added.
“Key risks to our cautiously optimistic positioning include a slower-than-expected rebound in China’s economy, extended above-trend inflation and worsening geopolitical risks between US and China. A drastic global growth slowdown also represents downside risks to our view,” the asset manager concluded.