Understanding Asia’s Financial Markets – Everything you Need to Know

0
51

Despite suffering from the ongoing health and socio-economic impact of Covid-19, US stocks appear to have recovered well from the market crash and subsequent sell-off in March. 

 

For example, the S&P 500 recently erased its 2020 losses to date, while the Nasdaq Composite actually reached a new high last week despite quantitative easing measures and the volatile nature of the North American economy.

 

However, economists believe that another stock market crash could follow at some point in 2020, while the USD continues to tumble following the Fed’s recent stimulus package. In this respect, investors are increasingly turning their attention to Asia, which is home to several asset classes that are likely to bloom in the near and medium-term.

 

The Rise of Asian Currencies – How has This Come About?

 

The decline of the dollar has certainly benefited currencies in Asia, which advanced last week following unease around the aforementioned stimulus measures.

 

According to Reuters, eight of the 10 leading Asian currencies showcased clear gains against the greenback last week, with the Indonesian Rupiah leading this charge and seeing increased demand amongst brokers.

This week, the Indian rupee has also made substantial gains against the USD, registering an increase of 15% over the course of 24 hours and peaking at 74.59 in the process.

 

Economists and financial market experts have also suggested that such currencies are likely to outperform the USD over the course of the next 18-24 months, creating a scenario where capital inflows into the region will increase and economies will benefit from sustained overseas investment.

 

Of course, the rise of further and localised Covid-19 spikes could yet weigh heavily on Asian currencies for the remainder of 2020, but there’s no doubt that this type of asset class offers genuine value in the shorter-term.

 

What About Asia Stocks?

 

Stocks in Asia arguably offer an even more attractive proposition from the perspective of global investors, with a number of wealth managers having claimed that Asia will be the only region to produce positive equities earnings growth through 2020.

 

We’ve seen a number of studies support this assertion too, with a survey of wealthy Asian investors revealing that 51% of respondents were largely optimistic on the current six-month outlook for stocks.

 

This compares with just 46% in Europe and 35% in the US, as the leading Asia-Pacific markets recorded gains of 49% since plunging to new depths in March.

 

Investors from overseas are also looking to back Asian stocks, with the $1.8 billion Goldman Sachs Emerging Markets Equity Fund having recently increased its wagers on some of the region’s largest tech firms. 

 

These include high-growth entities such as Alibaba Group Holding Ltd. and Samsung Electronics Co., with firms of this type now comprising 25% of their portfolio (up from 23% in late December).

 

This is a significant development, and one which reflects the rise of Asia as a prominent global technology hub. For example, Japan is now considered to be the world’s most technologically advanced nation, and with China ranking third and several Southeast nations competing to become the next Silicon Valley, we’re likely to see Asia’s tech stocks soar in the future.