Jupiter: Outlook 2024: Asia Pacific – A two-way pull for stock markets?

What can we expect from Asia Pacific (ex Japan) equity markets in 2024? Jason Pidcock and Sam Konrad give their views and discuss where they’re finding opportunities.

We are “top-down stock pickers”, meaning we take the macroeconomic environment, political systems, and geopolitics into account, while looking to identify the “winning” companies operating in the Asia Pacific (ex Japan) region.

Looking forward to 2024, we expect to see a two-way pull for markets. The prospect of looser monetary policy globally may allow for P/E expansion and higher prices; meanwhile, many businesses could struggle to prevent their earnings declining if we see weak economic growth and rising unemployment in key markets, such as the US. As inflationary pressures have eased, the next leg of this cycle may be one of weaker growth, as the lagged effects of the higher interest rates we’ve seen kick in.

Nevertheless, we still expect to see growth in earnings and dividends coming from several of the companies that we hold. These include the technology businesses we invest in, which experienced a difficult 2023 but which we think will likely see earnings rebound in 2024. Infrastructure, property and telecom stocks ought to feel some relief from a cessation in the rise of interest rates, particularly if combined with a decline in bond yields.

2024 will be notable for the large number of general elections happening all around the world. In Asia, these include elections in Taiwan, India, Indonesia, and elsewhere. Outside of the Asia Pacific region, key international elections will include those of the US and, most likely, the UK. If incumbents are ousted and we see new incoming parties taking control, we must be mindful of the potential resulting policy changes.

Investing in Asia still doesn’t have to mean China

We do not have any exposure to China after selling out of our remaining positions in the summer of 2022. We remain concerned about China’s political nature, both domestically and in relation to other countries, and we think it is likely to be a low growth command economy going forward due to a combination of state intervention and demographics.

In contrast, we remain positively disposed towards Australia; on a country level it is the largest weighting in our Asian Equity Income strategy. We expect Australia to outperform many of its developed market peers over the longer term. It is a fully functioning democracy, it has a productive workforce, and it is home to many successful companies with significant market shares and solid barriers to entry, with very few state-owned enterprises.

We also like Singapore, which is home to many attractive businesses with revenues from across Southeast Asia. Outside of more developed Asia, we have significant exposure to India, which offers strong growth opportunities in many domestic-focused sectors, as well as increasingly among exporters.

Seeking companies with key attributes

We do not identify as growth or value investors, instead looking for a combination of the two. We prefer those companies that look after their balance sheets, and those that are able – and willing – to share their profits with shareholders, with proven management teams and business models, reducing the need to speculate.

We were pleased with the resilience of the companies held in our strategy in 2023, and, while we cannot be certain what 2024 will bring, we continue to believe we are well positioned as we move into the new year. Many of the companies we invest in are already considered global leaders in their respective sectors, and we think the characteristics of the companies held in our strategy mean they should be able to withstand a recession, or even come out the other side stronger than their competitors.

The value of active minds: independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important information

This document is intended for investment professionals and is not for the use or benefit of other persons. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Holding examples are for illustrative purposes only and are not a recommendation to buy or sell. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier.

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