What to look for when investing in Asia Markets 2024?

Key Points:

• Lower Rates
• Pockets of Growth 
• Geopolitics and Election 

Lower Rates: 

The Fed’s plan to reduce interest rates is expected to dominate investors’ minds when it comes to assessing the future direction of the economy. The agency unveiled a roadmap that includes a 75-basis point cut in 2024, and a 100-basis point reduction in 2025. 

Central banks in various countries around the world follow the Fed’s lead, although some, such as Australia’s Reserve Bank, have already warned that they are prepared to act further to rein in inflation. 

Southeast Asia’s central banks have also refrained from raising rates, even though some, such as the Philippines’ central bank, are still hawkish.

Most investors will be focused on the Bank of Japan. The central bank is expected to decide whether or not it will start to unwind its negative policy. Japan’s inflation has been above its 2% target for more than 19 months, and the country’s wage negotiations will likely see a 5% rise.

According to Homin Lee, an economist at Lombard Odier, the various factors that have supported the normalization of the policy are expected to lead to a BOJ rate hike in 2024. He also noted that the bank’s 1% cap on 10-year bonds will likely end.

Pockets of Growth 

As interest rates begin to come down and inflation starts to ease, which sectors will perform well?

According to Hebe Chen, a market analyst at IG, inflation and economic growth are expected to normalize in 2024 and lead to a moderation in the expansion. This will benefit real estate and infrastructure firms, as well as commodities and energy companies.

She is bullish on tech and real estate in Asia. As interest rates fall, REITs will have more opportunities to acquire and recycle assets. This will allow them to reinvest the funds.

The potential rise in the global tech cycle will benefit real estate and investors. She noted that Taiwan, Singapore, and Vietnam could also outperform due to their growing number of R&D facilities and manufacturing capabilities. These countries, which are often used to address China’s manufacturing needs, are now producing for other markets.

She noted that China’s economy is expected to grow at a modest pace due to the government’s measures and an improving export outlook. A global tech recovery can also help boost Chinese exports.

Geopolitics and Election 

Election results in India, Taiwan, and the US will be closely watched. These events are expected to have a significant impact on the diplomatic and economic dimensions of the APAC region.