Despite a recent slowdown in growth across Asia, investors should remain optimistic about the region’s potential as key indicators suggest an economic rebound may be on the horizon, according to an international fund manager.
Fidelity Asia ETF investment director Gary Monaghan acknowledged the region had not delivered for investors recently mainly due to waning confidence in Chinese markets, but he sees potential for a resurgence as economies recover from the post-COVID slump.
“Asia’s really been on the sidelines for the last couple of years and it’s really been driven by a negative view towards China and Hong Kong. China dominates sentiment, it dominates flows and stock prices versus developed markets,” Monaghan noted during an online briefing held by the firm.
“From a regional perspective, it somewhat masks the quite strong fundamental stories that we’ve been seeing with economic development in India or the tech leadership from Korean and Taiwanese companies.
“Interestingly enough, we’re starting to see some green shoots coming through of economic recovery. Export growth is coming through, industrial profits are growing and I think that’s something we need to keep monitoring because it could create a nice growth projection.”
He added a downturn in the Chinese property sector and consumer spending had shaken investor confidence in the region, however, he forecast growth to pick up once the situation stabilised.
“The property sector has been a millstone around China’s neck. People have got a lot of wealth tied up in the property sector and it’s been in the doldrums,” he noted.
“However, we have seen that the Chinese government has come out with a huge stimulus package, around 300 billion renminbi, to try and clear the inventory that’s been building up.
“That could create a floor in property prices and therefore a base from which we can see consumers start to spend big again and also tap into those savings that have been built up over [the COVID-19 pandemic].
“Valuations have been reflecting this sort of negative sentiment over the past 12 to 18 months and the valuations relative to developed markets are standing up quite handsomely from here.”
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