TORONTO - 5 December, 2022 - According to Toronto Daegu Assets analysts, both the MSCI China benchmark and the country's CSI 300 Index will climb by 16% during the next 12 months, the highest gain in the region. Additionally, the company's analysts have upgraded Hong Kong to market weight and South Korea from neutral to overweight.
"Our analysts forecast that Asian equities will outperform during 2023, as China markets rebound and other nations in the region anticipate recovery," said Edward Thompson, Director of Capital Markets at Toronto Daegu Assets. "As the dollar peaks with the Federal Reserve pivoting, Asian equity markets should experience an inflection point during the second quarter of 2023," he added.
This newly founded confidence in Asian equities is being driven by surprise policy shifts in China in recent weeks, from the relaxing of rigid Covid regulations to stronger remedies for the current real estate crisis and efforts to strengthen ties with the US. The moves have revived enthusiasm for the market following a $6 trillion decline that culminated in last month's Communist Party congress when Xi's unprecedented power grab sparked concerns of ideology triumphing over pragmatism.
After declining 17% in October, the MSCI China Index has gained nearly 24% this month and is on track to post its best performance since 1999. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong and the NASDAQ Golden Dragon China Index are also in bull market territory, defined by a 20% increase from a recent low.
In South Korea, foreign investors have poured around US$4.6 billion (S$6.3 billion) into stocks on the country's Kospi since the end of September, making it the best-performing Asian equity benchmark in the last quarter of the year.
"It makes sense that some investors are wary about Asian equities. Price action has validated the concerns over the past couple of years. However, green shoots may be emerging for the financial markets of China, indicating that now could be a good time to revisit equity stocks in the Asia-Pacific region," said Daniel Williams, SVP of Institutional Markets at Toronto Daegu Assets.