Companies likely to be top performers in Asia in H1 2024

Here’s why India, Japan and Vietnam will be the fastest-growing markets in Asia-Pacific in the first half of 2024, according to analysts interviewed by CNBC.

India’s stock market has emerged as one of the region’s most popular markets over the past year, and investors are bullish on the country’s long-term prospects.

The benchmark Nifty 50 index rose 20% in 2023, hitting a new consecutive high.

India’s economic growth is expected to outpace other major Asian economies in 2024, with the International Monetary Fund expecting the country’s real GDP to expand by 6.3% this year, the same rate expected in 2023. be.

India’s growth prospects have been the driving force behind the country’s stock prices, even as neighboring China, the region’s largest economy, appeared to be struggling to meet its 2023 GDP growth target of 5%. .

Indian stock markets are also benefiting from strong earnings, impending interest rate cuts and increased participation from domestic investors. All these are expected to continue the Nifty 50’s record rally next year.

The wild card for 2024 will be the country’s general election. JPMorgan strategists said in a note that they expect the Nifty 50 to reach 25,000 companies next year if the ruling nationalist Bharatiya Janata Party remains in power.

The target of 25,000 represents an increase of more than 15% from the index’s previous closing price of 21,710.

However, JPM predicted that the Nifty could fall to 16,000 if the result of the general election is unexpected and there is a global economic recession, geopolitical tensions, rising oil prices, or a rise in the domestic unemployment rate. warned that it might.

Japan’s Nikkei Stock Average was Asia’s best-performing stock index last year, and analysts believe Japan’s stock market has more room to play in 2024.

The rally in Japanese stocks helped push the blue-chip Nikkei stock average up 28% last year, while the broader TOPIX ended 25% higher.

Japanese stocks rose on strong earnings results and growing expectations that the Bank of Japan will finally end its ultra-easy monetary policy after decades of near-zero interest rates.

Masashi Akutsu, a strategist at BofA Global Research, expects the rise in the Japanese market to continue until 2024, and also cited an increase in overseas investment.

BofA strategists believe the Nikkei Stock Average will reach 37,500 yen by the end of 2024. The index is currently trading around 33,464.17.

Akutsu said tech stocks and banks are BofA’s top picks for next year as the market expects the Bank of Japan to end its ultra-loose monetary policy, with each sector adding to its portfolio with both growth and value stocks. He said he is trying to find a balance.

After the last meeting of 2023, the Bank of Japan kept interest rates unchanged at -0.1%, within negative territory, while maintaining its yield curve control policy of keeping the upper limit on 10-year government bond yields at a reference value of 1%.

However, a slowing economy and slowing inflation could pose potential challenges for the Bank of Japan in terms of lifting its ultra-easy monetary stance. Investors are also eagerly awaiting next year’s spring wage negotiations to confirm the trend for significant wage increases.

Like India and Japan, Vietnam has benefited from the “China plus one” strategy, where companies diversify their investments to reduce dependence on China.

The country expects its GDP growth rate to be between 6% and 6.5% in 2024 on the back of strong imports and exports and increased manufacturing activity.

Thanks in part to optimism in the Vietnamese market, foreign direct investment surged by more than 14% last year compared to 2022.

According to LSEG data, $29 billion in foreign direct investment was pledged to Vietnam from January to November last year.

Yun Liu, ASEAN economist at HSBC, said China accounted for half of new FDI inflows to Vietnam this year, reflecting the Southeast Asian country’s attractiveness as an emerging manufacturing hub.

Andy Ho, chief investment officer of VinaCapital Group, said now is the right time for investors to enter Vietnamese stocks.

“Vietnam will be a good market over the next six to 12 months as it has a cheap valuation with a 2023 P/E ratio of around 11-12 times, which is around 20-12 times compared to the regional average,” Ho told CNBC. “That’s equivalent to a 25% discount.”

“Vietnam’s average daily trading volume has increased from $500 million a year ago to about $1 billion a day now,” he said, adding that investment opportunities are in the consumption, healthcare and real estate sectors. It was explained in detail.

“People are starting to realize that when they have a lot of liquidity, they don’t want to put it in the bank because the interest rates are no longer interesting, and then they look at other investment options. ”

Tyler Nguyen, vice president and head of institutional equity sales at Maybank Securities Vietnam, said investors should also be bullish on Vietnam’s e-commerce sector.

“Every year, we’re seeing 20 to 30 percent year-over-year growth,” he told CNBC, noting that e-commerce only accounts for 2 to 3 percent of retail sales.

Asked about the possibility of Vietnam joining MSCI’s list of emerging market countries, Nguyen said frontier economies are still in “early stages” but “we may see good news in 2025.”

Jefferies said in the note that China’s consumer confidence has not recovered from the pandemic due to high youth unemployment, debt risks and a crisis in the real estate sector, and spending habits have become more “rational.” He said that it has become.

While the pessimism in the Chinese market is unlikely to disappear anytime soon, analysts say there is still some bright spot.

Jefferies expects sales growth to normalize next year and advises investors to focus on consumer subsectors such as beer and sportswear. Maybank also likes China’s “new economy” sector, as well as the consumer sector.

Jefferies is also bullish on China’s health care sector, advising investors to be “selective” for stocks that are expected to grow better than expected and expand profits.