Five things to look for in Asian stocks amid 2022 reversal hopes

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Traders looking for a turnaround in Asian stocks in 2022 will keep a close eye on Chinese stimulus measures, the direction of the dollar, declining retailer participation and the outlook for stock trading.

The case for a rebound should be strengthened by lower valuations after the MSCI Asia-Pacific Index underperformed its global counterpart by around 20 percentage points last year. It fell about 4% with China’s regulatory crackdown and slower growth weighing on the index, but investors are hoping Beijing’s return to growth policies and higher vaccination rates in the country. region will reverse the trend this year.

“It is possible that Asian stocks will outperform their global counterparts,” as regional economies are expected to start taking more advantage of higher levels of immunization and reopening, said David Chao, global market strategist for Asia-Pacific outside. Japan at Invesco.

Here are five areas of interest to Asian investors as they navigate the New Year:

People’s Square

Traders expect mainland stocks to recover this year as Beijing pledges to support slowing economic growth driven by collapsing real estate and low consumption. Various government departments have pledged their support, including deeper cuts in fees and taxes, while the People’s Bank of China is already pumping more liquidity into the financial system. Further easing measures are also expected.

Political events such as the National People’s Congress in March will be closely watched for more clues on pro-growth policies and the dynamics of “common prosperity”. The 20th Party Congress in the second half of 2022 is also important because it could cement President Xi Jinping in power for life.

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And after a year of regulation that has plagued technology, tutoring and real estate stocks, BlackRock Inc. and HSBC Holdings Plc are among those saying the worst of China’s regulatory crackdown may be over. “It seems important to focus on stability and growth in such an important year – and not on restructuring and new regulations,” said Herald van der Linde, HSBC’s head of equity strategy for the Asia Pacific.

Border patrol

China, the only country in the world now with a Covid Zero policy, will likely keep its borders closed ahead of the February Winter Olympics given the resurgence of domestic virus cases. But once international borders open, it could be a major catalyst for cyclical actions from airlines to luxury stocks in the region, with Chinese tourists being the world’s biggest spenders.

“In terms of expectations, there is very little price for reopening China,” said Zhikai Chen, head of Asian equities at BNP Paribas Asset Management.

On the flip side, more lockdowns could send shockwaves through Asian supply chains. Regional giants such as Samsung Electronics Co. and BYD Co. are already facing production problems in Xi’an.

Dollar bill

With the Federal Reserve’s stimulus package weakening and a rate hike expected at least three times next year, the impact of a stronger dollar on Asian assets is cause for concern. Combined with weaker Chinese growth, it could weigh on commodities and currencies in 2022, adding to the constraints weighing on emerging Asian economies amid tightening domestic monetary policy.

Southeast Asian stocks appear particularly vulnerable to capital outflows as the omicron spreads, although a repeat of the 2013 taper tantrum is unlikely. Nonetheless, a weaker yen is good for the Japanese stock market, which is rich in exporters.

JPMorgan Asset Management strategist Tai Hui believes the Fed is communicating adequately “to prevent sharp swings in bond yields, interest rates and exchange rates,” limiting the negative impact on Asian equities.

The madness of retail

After a two-year frenzy, retail investor participation and new account openings in places like South Korea and India are showing signs of fatigue. This could reduce volatility and crowded trading in the markets in 2022, allowing more fundamentally-based foreign investor participation.

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“A lot of foreign investors who tend to be more fundamental would go back to looking to Korean equities,” Chetan Seth, Asia-Pacific equities strategist at Nomura Holdings Inc. said in a briefing this month. “We expect two rate hikes from Taiwan’s central bank sometime in 2022, and this could be the catalyst that only slows participation in retail.”

IPO pipeline

After a tumultuous year for Hong Kong stock quotes, investors will be eagerly awaiting a number of so-called IPOs, including Didi Global Inc. The appetite for these quotes could cool, however, due to tighter regulations. Chinese.

Meanwhile, the blank check company craze may finally spill over into Asia, as the first wave of special purpose acquisition companies get clearance to list in Singapore and Hong Kong rolls out a regulation.

–With help from Jeanny Yu, Youkyung Lee, Low De Wei and Ashutosh Joshi.

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