Public Equities

What’s Driving Performance Across Asian Equities?

September 2022 – 2 min read

SooHai Lim discusses which themes are shaping performance, and creating potential opportunities, across Asian equities today.

What are the key factors driving performance across Asian equities?

Given that inflationary expectations appear to be peaking, with concerns shifting from inflation to a potential recession, markets have started to price in a less aggressive U.S. Federal Reserve (Fed), while falling oil and other commodity prices have also helped to ease profit margin pressures for Asian companies. These factors have provided support to the Asian equities asset class as a whole, with most regions in Asia—with the exception of China and Hong Kong—seeing a positive rebound since July.

At the same time, the gradual reopening of economies has been positive for sentiment on ASEAN markets. India also rebounded on resilient earnings, while foreign investor flows have returned to positive territory after 10 months of outflows. While overall sentiment has improved, we are closely monitoring company earnings. In particular, while ASEAN company earnings on the whole have reversed back to positive growth territory, led by Singapore, export-driven markets like Korea may be further impacted by the weaker economic outlook in developed markets.

Meanwhile, Chinese equities have declined in recent weeks due to a number of concerns—including the resurgence of COVID, geopolitical tensions and property market concerns—but negative earnings revisions appear to have bottomed to some extent. Supportive policies and ongoing normalization from COVID disruptions could help to boost domestic activities in China going forward.

In terms of performance, are there specific Asian equities markets that can potentially decouple from China in the short term? What about the long term?

This year, regions that have had stronger earnings momentum have outperformed Chinese equities such as Indonesia, India and Thailand, where economic reopening tailwinds are boosting domestic demand and/or reviving tourism, which is supporting the earnings recovery momentum. In the case of Indonesia, the country is also benefiting from strong commodities prices. On the other hand, export-driven markets such as Taiwan and Korea have underperformed China, more so from concerns over slowing global growth.

In the longer term, we believe the performance of individual Asian markets will be driven by country-specific growth factors, including monetary and fiscal policies, and importantly, exposure to companies with solid sustainable growth at attractive valuations. For example, in China, we have a preference for high-quality companies that have exposure to structural themes such as localization—which includes changing consumption trends and electric vehicle (EV) manufacturing—global renewable infrastructure manufacturing (solar and wind), and strategic self-sufficiency (manufacturing semiconductors). And in India, we believe industries that are well-positioned to increase domestic market share and reduce import reliance stand to benefit. In ASEAN countries, themes such as supply chain diversification, consumer upgrades, and the adoption of technology are key fundamental drivers of long-term performance.

Going forward, where do you see opportunities emerging across the asset class?

We believe the economic reopenings in ASEAN countries, as well as the overall consumption upgrade and digitization megatrends in Southeast Asia, will create attractive opportunities in companies with exposure to these themes. We also see value in companies with exposure to structural growth trends that have high entry barriers—including companies in the renewable energy supply chain in China, key semiconductor manufacturers in South Korea and Taiwan, and select businesses within the EV supply chain.

At Barings, we believe bottom-up, fundamental analysis is crucial for stock selection, rather than top-down allocation. Our approach remains anchored in our Growth-at-a-Reasonable-Price (GARP) investment philosophy. At the stock selection level, we believe this approach helps us to avoid overpaying for a company’s growth, while at the portfolio construction level, it helps limit exposure to unintended styles or risks.


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.