Schroders, together with other wealth managers, recently revealed its investment convictions for the second half of 2024, highlighting investment opportunities across asset classes and themes for investors in Asia to look at, notably artificial intelligence.

Schroders and other houses such as HSBC are optimistic about the outlook for global equities in 2024, particularly Asian ones, against a backdrop of solid fundamentals, particularly improved earnings expectations. 

“In regions such as the UK, US, Japan, and emerging markets, one-fifth of companies are expected to achieve earnings' growth exceeding 20 per cent, reflecting ongoing improvements in corporate earnings,” the UK-listed Schroders said in a note.

The firm also takes a positive outlook on gold, noting that it typically performs well after the US Federal Reserve begins a rate-cutting cycle. “As an asset class, it will offer investors protection against more persistent inflation and sovereign concerns. The US dollar remains a key holding given its diversifying properties, especially against riskier positions in portfolios and positive carry,” the firm said.

Asia
Schroders is particularly optimistic about the Asian investment markets in the second half of the year, supported by expectations of strong earnings' growth and a favourable liquidity environment.

"We anticipate that Asian economies will achieve robust economic growth in 2024 and 2025. An accelerating global manufacturing cycle, robust industrial production, energy transition and strengthened new-economy sectors will boost China’s economy,” Keiko Kondo, head of multi-asset investments, Asia, said. 

"US monetary policy remains a key driver for Asian markets. Looking back at historical data, peaked or steady US interest rates tend to benefit Asian stock market performance. Compared to developed markets, Asian equities remain undervalued and corporate earnings are on the rise, suggesting potential for Asian stocks to catch up,” Kondo added.

HSBC agrees
Other wealth managers also favour Asian equities in 2024. “Asia remains the most important growth engine of the global economy with projected GDP growth and earnings' growth for Asia ex-Japan in 2024 at 4.6 per cent and 23 per cent, respectively, well above the global peers,” Cheuk Wan Fan, chief investment officer, Asia at HSBC Global Private Banking, said recently.

Fan expects China’s latest property boosting measures to stabilise GDP growth at 4.9 per cent this year. "India’s economic activity continues to surprise to the upside on multiple fronts, supporting our forecast 2024 GDP growth of 6.3 per cent,” Fan said. “So far, the global equity rally has been led by Big Tech. We have been broadening our geographical and sector exposure in our global equity portfolios to widen the opportunity set and find attractive stocks at reasonable valuations.”

Fan holds an overweight view on equities in Japan, India, and South Korea, where she sees the best opportunities for tapping into Asia’s structural growth themes. Nevertheless, she stays neutral on Hong Kong and mainland China equities.  

Joseph Little, global chief strategist at HSBC Asset Management also highlighted how emerging market (EM) equities have been resilient to the higher-for-longer interest rate environment, the growth challenges facing China, and the stronger dollar. Little believes valuation discounts and broadening global growth present an opportunity for emerging markets, particularly in Asia, to lead in the second half of the year.

"China has seen strong performance, particularly following the introduction of policy support, despite the outlook being complicated by the housing market, debt overhang, and weak consumer confidence. India remains the fastest growing major economy in the world, supported by a combination of growth and disinflation, strong profits, and megatrends including digitalisation, infrastructure, and demographics," Little said. Elsewhere, an upswing in the semiconductor cycle improves his outlook for Taiwan and Korea.  

Regarding the fixed income market, following defaults in the Chinese real estate sector, Kondo believes that the proportion of real estate in the Asian credit universe has decreased, leading to a wider range of higher-quality and more diversified issuers in the market. Kondo thinks that Asian investment-grade bonds will provide attractive income with lower volatility in the face of future macroeconomic uncertainty than comparable bonds in developed markets. For example, India's drive to increase renewable energy is continuing to offer attractive opportunities to harvest favourable yields through investment in utilities' sector bonds.

Little also thinks that parts of the emerging market fixed income universe look attractive, particularly India, Indonesia, and Mexico, with strong medium-term performance supported by solid fundamentals, including strong growth and improved policy credibility, as well as cheap valuations. "Approaching interest rate cuts from the Federal Reserve and a weaker dollar should also support this space," Little said.

Wrapping up, Kondo highlighted three Asian investment themes for the second half of 2024: artificial intelligence, with Taiwan tech stocks lagging global peers by around 20 per cent in valuation; corporate governance, as Japan’s successful experience in implementing corporate reforms during 2023 may broaden to other Asian markets such as China and Korea; and India’s growth potential, which should not be underestimated.

India
With India’s GDP forecast to increase at an average of 6.5 per cent annually over the next five years, Dina Ting, head of global index portfolio management, Franklin Templeton, is also optimistic that this diverse and dynamic economy can potentially realise a multi-decade growth story, perhaps with even hardier democratic checks in place.

“India’s equity markets are also well-diversified across sectors and company types that potentially offer an elevated growth outlook and opportunities driven by domestic consumption and emerging industrial prowess,” Ting said. “Financials hold the largest share, followed by significant consumer discretionary, industrial, energy and technology weightings. The market also offers good exposure to consumer staples, utilities and healthcare names.” See more commentary about India here.