Eastspring Investments "Focus on Asia and Emerging Markets Next Year"

'2024 Market Outlook' Report Published

With expectations of a Federal Reserve (Fed) interest rate cut next year, there is a forecast that investment opportunities can be found in emerging markets, including Asia. Eastspring Asset Management Korea announced on the 21st this analysis in its '2024 Market Outlook' report, which contains next year's outlook from the global Eastspring Investment team.

Park Cheon-ung, CEO of Eastspring Asset Management Korea [Photo by Eastspring Asset Management]

The report defines next year’s economy as a 'period of transition' that will experience structural shifts in policy stance and investment environment. As inflationary pressures in global markets ease, central banks around the world are expected to end or enter the final stages of their rate hike cycles, with a full-fledged period of interest rate cuts likely to arrive.

Next year, macroeconomic uncertainties are expected to increase, emphasizing the qualitative aspects of bonds, with high-quality investment-grade bonds from the US and Asia anticipated to attract attention. For investors preparing in advance for the rate cut cycle, "local currency bonds in Asia are attractive, and Korea is highly likely to be the first among Asian central banks to initiate rate cuts," the report advised.

Risk assets such as global equities may show weakness in the medium term, but Asian equities excluding Japan are expected to deliver strong investment performance. This is based on the view that the anticipated global growth slowdown next year will impose more constraints on developed markets than on emerging markets.

Furthermore, with recent geopolitical tensions and the aftermath of COVID-19 reshaping international trade patterns, global emerging market equities, including ASEAN and Indian stocks, are expected to benefit. In particular, "the popularity of generative artificial intelligence (AI), which emerged as a key theme this year, continues, brightening the investment outlook for Asian tech stocks." Korea and Taiwan were identified as beneficiaries due to the increased demand for next-generation high-bandwidth memory (HBM) required for AI semiconductors.

The report also addressed the 'rebalancing' of the Chinese market. Although the Chinese stock market faced difficulties this year due to a weak real estate sector, its manufacturing dominance remains intact. The report stated, "The valuation of Chinese stocks being below the long-term average is attractive. As China adjusts its growth model from investment-driven to consumption-based, there will be opportunities in sectors that can benefit from policy support, such as advanced manufacturing, healthcare, and consumer goods."

It also forecasted that the refinement of ESG (Environmental, Social, and Governance) classification systems will enhance the transparency and reliability of sustainable investments. The Asia region is seen as having significant growth potential as the transition to eco-friendliness accelerates. The report emphasized, "Attention should be paid to Asia’s energy efficiency, natural gas, and low-carbon materials sectors," and added, "Ongoing corporate governance reforms and the adoption of stewardship codes across Asia will work favorably for the market." However, it also noted the need to prepare for potential risks such as geopolitical crises in the Middle East and the US presidential election in November next year.

Park Cheon-ung, CEO of Eastspring Asset Management, said, "Capturing the various turning points that will emerge across multiple sectors next year is of utmost importance," and added, "Eastspring Asset Management will lead in providing diversified investment solutions that timely meet the demands of Korean investors, based on our extensive global investment experience and vast research capabilities."