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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 value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested.
Exchange rate risk: Investing in assets denominated in a currency other than that of the investor’s own currency perspective exposes the value of the investment to exchange rate fluctuations
Concentration risk: Funds with a narrow or concentrated investment strategy may experience higher risk and return fluctuations and lower liquidity than funds with a broader portfolio
Emerging market risk: Emerging economies typically exhibit higher levels of investment risk. Markets are not always well regulated or efficient and investments can be affected by reduced liquidity
Derivative risk: The value of derivative contracts is dependent upon the performance of an underlying asset. A small movement in the value of the underlying can cause a large movement in the value of the derivative. Unlike exchange traded derivatives, over-the-counter (OTC) derivatives have credit risk associated with the counterparty or institution facilitating the trade
Operational risk: The main risks are related to systems and process failures. Investment processes are overseen by independent risk functions which are subject to independent audit and supervised by regulators
Counterparty risk: The possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations
Liquidity risk: Liquidity of securities may also fluctuate, resulting in situations where an investor may not be able to buy or sell the security in a timely manner at their preferred price range if the turnover volume were to drop significantly
Taxation risk: Investors should note that the proceeds from the sale of securities in some markets or the receipt of any dividends or other income may be or may become subject to tax, levies, duties or other fees or charges imposed by the authorities in that market
Custody risk: Investors should be aware that they are exposed to the risk of the custodian not being able to fully meet its obligation to restitute in a short time frame all of the assets of the Fund in the case of bankruptcy of the custodian
Sustainable investment policy risk: Sustainable Criteria are subjective and are subject to the Investment Adviser’s discretion. The use of Sustainable Criteria may affect the Fund’s investment performance
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This Site is intended for Institutional Investors in Australia only.
In Australia, this document is issued by HSBC Bank Australia Limited ABN 48 006 434 162, AFSL 232595, for HSBC Asset Management (Hong Kong) Limited ARBN 132 834 149 and HSBC Asset Management (UK) Limited ARBN 633 929 718. This document is for institutional investors only, and is not available for distribution to retail clients (as defined under the Corporations Act). HSBC Asset Management (Hong Kong) Limited and HSBC Asset Management (UK) Limited are exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of the financial services they provide. HSBC Asset Management (Hong Kong) Limited is regulated by the Securities and Futures Commission of Hong Kong under the Hong Kong laws, which differ from Australian laws. HSBC Asset Management (UK) Limited is regulated by the Financial Conduct Authority of the United Kingdom and, for the avoidance of doubt, includes the Financial Services Authority of the United Kingdom as it was previously known before 1 April 2013, under the laws of the United Kingdom, which differ from Australian laws.
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We see Asia’s growth recovery strengthening in 2022, enabling a virtuous and sustainable economic cycle in the region
