Asian stocks have been on a bullish run since the end of October 2020, with the MSCI Asia Pacific Index up 23%, outperforming the US benchmark by the most since 1993 and also beating its European peer. The primary driver behind this rally has been China’s reopening and a weakening US dollar, as investors look for recession-proof markets.[0]
The rally has seen the MSCI Asia gauge up 7.2% in January, with many more months of gains ahead, according to a survey of fund managers by Bank of America Corp.[0] China’s growth outlook is rapidly improving, providing a much-needed boost to the economies of the region.[0] This is in stark contrast to Europe and the US, where earnings estimates are being downgraded.
Hong Kong stocks lagged their Chinese peers on the first trading day after the Lunar New Year break, with the benchmark Hang Seng Index shedding 0.5%.[1] Galaxy Securities analysts reckoned H-shares could enjoy a good run in the coming months, as international investors’ sentiment over China and Hong Kong equities has been tracking up.[2] They also noted that corporate earnings in 1Q could get a boost from continued economic activity resumption as Covid curbs are relaxed.[2]
Investors expect the Federal Reserve to raise interest rates by 25 basis points on Wednesday and for the Bank of England and European Central Bank to follow with half-point hikes the day after.[3] Any deviation from this script would be a real shock and could throw the markets into disarray.
0. “Bullish Calls Mount as Asian Stocks Go On a Tear in the New Year” Yahoo! Voices, 21 Jan. 2023, https://www.yahoo.com/now/bullish-calls-mount-asian-stocks-010000853.html
1. “Chinese stocks surge after week-long holiday By Investing.com” Investing.com, 30 Jan. 2023, https://www.investing.com/news/stock-market-news/chinese-stocks-surge-after-weeklong-holiday-2990684
2. “Indian Morning Briefing: Asian Markets Mixed at Start of the Week” Morningstar, 30 Jan. 2023, https://www.morningstar.com/news/dow-jones/202301291095/indian-morning-briefing-asian-markets-mixed-at-start-of-the-week
3. “Asia shares brace for rate hikes, earnings rush” CNA, 30 Jan. 2023, https://www.channelnewsasia.com/business/asia-shares-brace-rate-hikes-earnings-rush-3240431