November 3, 2022
Five experts spotlight opportunities for investors in the region
Finding robust returns on investments — or even safe havens — is hard going in Asia at the moment.
It’s been a bumpy six months, with accelerating inflation, interest rate hikes, local currencies slumping against the US dollar and volatile markets. And it all comes against the backdrop of ongoing economic turmoil in China.
To find pockets of opportunity in these turbulent times, we asked five experts where they’d invest $100,000 in Asia now. Ideas stretch from Taiwanese tech companies and Chinese convertible bonds to cryptocurrency and telecommunications firms.
When asked where they might personally invest $100,000 in something they’re passionate about, the experts’ answers were equally varied, ranging from large gemstones and vintage gasoline-powered cars to champagne, rare collectibles and even British pubs.
To find ways to play the themes laid out below using exchange-traded funds, Hong Kong-based Bloomberg Intelligence ETF analyst Rebecca Sin weighs in.
Before jumping into the markets, it’s smart to make sure you have enough money in liquid investments so that you won’t need to sell into a down market if a sudden expense hits. It’s also important to stay well-diversified across asset classes, investment styles and geographies.
Helen Zhu, managing director and chief investment officer, Nan Fung Trinity
One promising area to watch in the coming quarters are markets that were crushed in 2022 by the exceedingly strong US dollar. We favor emerging markets that aren’t tied to commodity producers and North Asian countries such as Hong Kong/China, Taiwan and Korea because of their favorable risk/reward.
The extreme pace of US monetary policy tightening this year has resulted in a surge in the US dollar against its trading partners. We think we are in the seventh inning of this divergence in growth and in policy. Global central banks such as the Bank of Japan, the People’s Bank of China and many others have started to actively defend their currencies. If other central banks start to let rates drift upward, or once the tightening impacts on the US economy start to show through lower inflation or much weaker data, we think the dollar will peak in the coming months.
Another potential driver for convergence between the value of the US dollar and other currencies would be any policy directional changes in China, where strict adherence to Covid Zero policies have hindered the growth-boosting effects of other stimulative fiscal or property policies. Any fine-tuning or easing of strict Covid restrictions could meaningfully boost growth sequentially off a very low base.
In such scenarios that lead to an inflection in the US dollar strength, markets most strained by recent local currency depreciation could see significant normalization of valuations. We would avoid commodities economies such as Indonesia, however, given our bearish view on the commodities price outlook as supply constraints may ease while demand is less certain.
We think Taiwan and Korea also start to look more interesting in the first half of 2023 once the tech earnings cuts have come through. We believe major tech leaders in memory chips and semiconductors may lead the rebound in 2023. China’s potential sequential economic improvement could give markets a short-term boost into the coming quarters, although longer-term potential hinges more on structural policy direction and geopolitics. Sectors in China that we think may outperform on any bounce include internet, consumer discretionary and insurance/brokers.
For full article, please visit: https://www.bloomberg.com/features/how-to-invest-100k-asia/?srnd=premium-asia#xj4y7vzkg&leadSource=uverify%20wall