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Asian equities: Beyond a summer of discontent

Important information

  • The Funds invest mainly in Asian equities (excluding Japan).
  • The Funds are subject to the risks of investing in emerging markets and smaller companies.
  • The Funds may invest in onshore Chinese securities through various market access schemes and China A-shares Access Products. Such investments involve additional risks, including the risks associated with China’s tax rules and practices.
  • Because the Funds’ base currency, investments and classes may be denominated in different currencies, investors may be affected adversely by exchange controls and exchange rate fluctuations. There is no guarantee that the currency hedging strategy applied to the relevant classes will achieve its desired result.
  • The Funds may invest in financial derivative instruments for investment purpose which may lead to higher volatility to its net asset value.
  • The Funds may pay dividends out of capital or gross of expenses. Dividend is not guaranteed and may result in capital erosion and reduction in net asset value.
  • The Funds’ investments may involve substantial credit, currency, volatility, liquidity, interest rate, tax and political risks. Investors may suffer substantial loss of their investments in the Funds.
  • Unit trusts are NOT equivalent to time deposits. Investors should not invest in the Funds solely based on the information provided in this document and should read the offering document of the Funds for details.

Rapidly changing forces from the resurgence of Covid-19 to China’s regulatory tightening have swept across the Asian equity landscape in the past few months. With the summer of discontent having coming to a close, we are cutting through the noise to provide the latest market insights and highlight active and efficient investment strategies that investors can put to work.  

Despite the differing pace of recovery in various parts of the region, based on vaccination rates and their exposure to external factors, we maintain our confidence in Asia’s economic resilience and structural growth opportunities.

Our Asian equity investment team’s unique insights, bottom-up investment process and high-conviction calls have continued to drive strong and consistent returns even in the current environment. Explore this page to see how we have chartered our course amidst the challenges of an evolving landscape.


Asian Equities: Beyond a summer of discontent

Hear more from Alexander Davey, Global Capability Head for Active and Quantitative Equity


Why invest in Asian equities?

Plenty of room for growth in ASEAN and India

Real GDP growth for ASEAN and India in 2021 are expected to be 3.86% and 9.41% respectively. Both markets have seen macro recovery with strong fiscal bounce and positive earnings, along with a good IPO pipeline.

Overall, the prospects for a more broad-based recovery should support the regional growth and corporate earnings in 2022.

Asian economies are in various stage of economic cycle, but ASEAN and India have plenty of room to grow

Source: IMF (WEO April 2021 database), CEIC, Bloomberg, HSBC Asset Management, September 2021. Any views expressed were held at the time of preparation and are subject to change without notice. Past performance is not a reliable indicator of future performance. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only.

Asia expected to lead 2022 earnings growth

Asia ex-Japan equities are trading at a discount to their US and European counterparts, while providing higher forecasted earnings growth.

Forecasted earnings growth for Asian ex-Japan equities averages 12.5% in 2022, compared with 8.5% and 3.9% for US and European companies, according to market consensus data in September 2021.

At an individual market level, robust earnings growth in India, Korea and China is expected to support investor confidence, despite ongoing regulatory uncertainties relating to Chinese and Korean companies, in particular.

Korea and Taiwan lead 2021 earnings growth amid attractive valuation 

Source: Bloomberg, HSBC Asset Management, data as of September 2021.
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purpose only.

Pandemic-induced digital acceleration

Tipping point - The pandemic has fast-tracked the adoption of the technology in Asia with an increasing number of consumers moving to online channels, accelerating the digital transformation of business models and the supply chain in the region. Innovation and manufacturing prowess in high tech space have also been significantly upgraded amidst the rising need for technological self-sufficiency.

Digital adoption - In Asia, the advent of the 5G mobile technology is supported by its highly adaptable digital consumer base and government investments in “new infrastructure”, including autonomous driving, advanced healthcare, fintech and the Internet of Things (IoT). Amidst multiple driving forces, 5G subscriptions in region are expected to rise rapidly to about 1.2 billion in 2024, from less than 50 million in 2020.

Secular trend - In addition to the rise of 5G, Taiwan and Korea are home to some of the world’s largest and leading hardware and semiconductor manufacturers. These export-driven economies will likely continue to benefit from the secular trend of digitalisation – an important investment theme that could generate alpha for investors for years to come.

Asia-Pacific: 5G subscriptions (2019-2024)

Asian equity valuation remains attractive

Source: GlobalData’s 2020 forecast . For illustrative purposes only.

 


Why consider HSBC’s Asian equity capabilities

Why consider HSBC’s Asian equity capabilities

Note: Representative overview of the investment process, which may differ by product, client mandate or market conditions.


Our Asia ex Japan equity strategy


Peer group quartile ranking of HSBC’s Asian equity capabilities

Based on cumulative performance (as of 31 August 2021)

M* rating

YTD

1Y

3Y

5Y

HSBC GIF Asia ex Japan Equity

****

3

2

2

2

HSBC GIF Asia ex Japan Equity Smaller Companies

****

2

1

2

2

HSBC GIF Asia Pacific ex Japan Equity High Dividend

*****

3

3

2

1

Source: Morningstar, as of 31 August 2021. Quartile rankings measure the fund’s total return performance during the respective period against other funds in the same category – EAA OE Asia ex-Japan Equity, EAA OE Asia ex-Japan Small/Mid-cap Equity, EAA OE Asia-Pacific ex-Japan Equity Income, with 1st quartile as the highest ranking and the 4th quartile the lowest ranking. For illustrative purposes only. Past performance is not indicative of future returns.


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