“Asia is expected to account for 60% of global GDP growth in 2024 – higher than the pre-pandemic average. Despite higher risk attached to geopolitics and China’s economy, it will remain the main region for growth opportunities,” says the Economist Intelligence Unit.
The EIU reports that Bangladesh, Indonesia, Vietnam, Malaysia and, to a certain extent, the Philippines are likely to see accelerated growth in the medium term. These nations are expected gradually to approach the GDP per capita levels observed in developed Asian economies such as Japan, Singapore and South Korea.
The outlook for Asia has generated substantial optimism concerning potential prospects in the region’s stock markets for the upcoming year.
The anticipated robust growth and a relatively promising outlook in Asia could present attractive potential for discerning investors in 2024.
A significant theme is the potential for disruptive technological innovation, providing investors with rewarding and untapped opportunities in companies well positioned to benefit from ongoing transformations.
We expect the attractiveness of small-cap companies to rise for investors too.
Also, there is an expectation of a dual impact on stock markets in the Asia-Pacific region.
The possibility of a more relaxed global monetary policy might facilitate price-to-earnings expansion and higher prices.
But there are also fears about companies facing issues to prevent declining earnings in the event of weak economic growth and rising unemployment, especially in key markets such as the US.
Despite these concerns, there is an anticipation of an upswing in earnings and dividends within the technology sector.
Additionally, assertions are made that infrastructure, property, and telecom stocks may experience relief due to a halt in the ascent of interest rates.
The correlation between Asian earnings and export growth is emphasized, acknowledging a challenging backdrop for exports in 2023. Nevertheless, positive signs of recovery have emerged in Asian exports, providing a basis for earnings growth in 2024.
Additionally, Asian economies with robust local demand, a solid tourism recovery, and the ability to capitalize on AI (artificial intelligence) demand are expected to contribute to bolstering earnings growth.
Japanese equities in 2024
Goldman Sachs Research predicts a resurgence in the Japanese equity market in 2024, driven by robust global economic growth and reforms in the stock market.
The TOPIX, a gauge of Japanese stocks, is expected to climb by about 13%, reaching 2650 by the conclusion of 2024.
Its economists anticipate another year of growth outperformance across various economies, including Japan’s. The country’s real (inflation-adjusted) GDP growth is forecast to expand by 1.5% in 2024, surpassing the consensus estimate of 1% from economists surveyed by Bloomberg.
A pivotal element in TOPIX analysts’ projections is the Tokyo Stock Exchange’s reforms in company governance, which they assert “have significantly impacted the Japanese equities market.”
The TSE has introduced incentives for listed companies to enhance valuations and earnings, with the possibility of delisting companies unable to demonstrate efficient capital utilization.
Investors will view the reduction of cross-shareholdings in Japanese companies, where firms own shares in their business partners to maintain relationships, as a positive indicator of improved governance.
All in all, we expect a positive year for Asia equities in 2024 driven by strong growth momentum.
Nigel Green is founder and CEO of deVere Group. Follow him on Twitter @nigeljgreen.