Slowing pace of viral infections and optimism about China’s economic recovery are making Asian stocks more attractive to some fund managers as global market volatility jumps ahead of the week’s US vote next.
GAM Investment Management, Robeco Hong Kong Ltd. and Nordea Investment Funds SA see regional stocks extend October’s gains, regardless of who wins the election. The MSCI Asia Pacific Index has beaten the MSCI All-Country World Index the most since 2008, thanks to a rally in Chinese tech stocks such as Tencent Holdings Ltd. and Alibaba Group Holding Ltd.
New daily virus cases in Asia-Pacific are down by about a third from a month ago, while the United States and parts of Europe have seen record increases in recent days. The Chinese economy has regained all the ground it lost in the first half of the year, boosting the region’s growth prospects. In contrast, Germany and France have returned to lockdowns, causing European equities to fall sharply.
“Asia has become a haven of peace” as the pandemic has worsened in other regions and China recovers, said Jian Shi Cortesi, fund manager at GAM in Zurich, which manages 131 billion dollars. dollars in assets. “The two main factors driving the markets right now, namely electoral uncertainties in the United States and pandemic lockdowns, tend to have more impact on the United States and Europe than on Asia.
China’s latest economic data shows its recovery from the pandemic crisis is broadening, with stronger growth in manufacturing and consumer spending. Improving corporate earnings along with China’s goal of becoming a tech powerhouse should offer new catalysts for traders in the country’s stock market, which has been the quietest in more than four years.
“China’s recovery is expected to support the Asia region through economic ties,” and will benefit South Korea and Taiwan the most, Cortesi said.
Joshua Crabb, a portfolio manager at Robeco, said Asian stocks will continue to outperform as “economies begin to heal” from virus-induced damage and valuations are cheap. Nordea investment strategist Sebastien Galy said managers at his company were positive mainly because China was recovering.
To be sure, tougher pandemic measures in Europe could weaken the recovery prospects of some Asian economies heavily dependent on exports, such as China and Singapore.