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Public Equities

Asian Equities: Opportunities Emerge, but Caution is Key

October 2023 – 2 min read

A number of factors are supporting the outlook for Asian equities—but given heightened risks across the market, a disciplined, bottom-up approach remains crucial.

Despite expectations for the interest rate environment in the U.S. to stay higher for longer, and amid heightened uncertainty across global markets today, there are a number of reasons to suggest Asian equities remain relatively well-positioned. For one, as the relative strength of the U.S. dollar moderates, the asset class should be supported. In addition, the majority of Asian central banks remain on track to ease monetary policies next year. At the same time, as we head into the seasonally stronger quarter of the year, markets are likely to receive some support from the recently improving economic data in China and a stronger earnings growth outlook for the region in 2024.

Opportunities Across the Region

In China, the numerous policies to stabilize and reinvigorate the economy appear to be gaining traction with August’s industrial production, retail sales, and September’s PMI figures showing signs of improvement. Data from October’s Golden Week holidays suggests consumption recovery is on track. While investor sentiment remains muted, we believe further policies to address weak demand and high leverage in the property sector, support from China’s local government financing vehicle (LGFV), improving economic data, and a potential turnaround in corporate earnings will likely boost sentiment—especially given their attractive valuations.

Elsewhere, with the expected bottoming of the global semiconductor cycle this year, investors have re-rated Taiwan and Korea ahead of the possible fundamental turnaround next year. The rapid adoption of generative AI has helped accelerate the troughing out and recovery of specific parts of the semiconductor and tech hardware value chain. Given that we are at the initial stages of this secular growth trend, we see opportunities in supply chains in Korea and Taiwan, which are best positioned to benefit from this powerful long-term trend. There are also opportunities in interesting Korean mid-cap companies such as those in the medical aesthetics space, where Korea has a competitive advantage.

Meanwhile, Southeast Asia is on track for a solid recovery in tourism in 2023 driven by supportive government policies and pent-up global demand. The momentum is likely to continue well into 2024 with the gradual return of Chinese visitors. We are constructive on a number of structural and company-specific opportunities across Southeast Asia, such as consumption uplift in Indonesia until its election in early 2024, supply chain relocation opportunities in Malaysia, and beneficiaries of supportive policies from a business-savvy Thai government.

The long-term outlook for Indian companies is also compelling, but well known. As a result, valuations remain at a premium to the region given a superior and sustainable earnings growth profile for Indian companies. Yet despite India’s structural growth attraction—given the strong outperformance since last year—the market risks being used as a funding source should sentiment around China improve. Nevertheless, we are monitoring market movements should any attractive entry points emerge.

Our Approach

Given the variety of opportunity set, we believe it is important to take a disciplined, bottom-up approach to stock selection. We continue to see value in Asian companies with exposure to major secular growth themes: technological ubiquity (digitalization and connectivity of everything), evolving lifestyle and societal values (sustainability, millennial/Gen Z consumption trends, healthy living), and de-globalization (supply chain diversification/bifurcation and reshoring).

At Barings, while style rotations have caused some volatility across markets, our approach remains anchored in our Growth-at-a-Reasonable-Price (GARP) investment philosophy. This has positioned our portfolios favorably for the longer term.



SooHai Lim, CFA

Head of Asia ex-China Equities

The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, investment recommendations, or investment research.

In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate.

Unless otherwise mentioned, the views contained in this document are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this document may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any forecasts in this document are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Any investment results, portfolio compositions and/or examples set forth in this document are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments.

Investment involves risks. Past performance is not a guide to future performance. Investors should not only base on this document alone to make investment decision.

This document is issued by Baring Asset Management (Asia) Limited. It has not been reviewed by the Securities and Futures Commission of Hong Kong.

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