As investors consider their global portfolio allocations in a fresh light, given significant macroeconomic and geopolitical shifts this year, Asia broadly — even allowing for current China concerns — offers valuable diversification and growth potential, with the region forecast to contribute approximately 70% of global growth in 2023.
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Asia is forecast to contribute around 70% of global growth in 2023
Putting China in perspective
Despite recalibrated market expectations on China GDP growth and policy support, the credible case for investment in China continues to draw on:
- ample room for policymakers to extend targeted support — even if the pace and extent of this support seems uneven;
- selective fundamentals which are more resilient than broad macroeconomic indicators, coupled with attractive valuations; and
- significant innovation capability and industrial muscle at scale across many markets, including a 60-90% share of the global market across electric vehicle battery components.
While geopolitics cannot be ignored, we believe Sino-US trade dependency will continue to bring both parties to the table and set a tone of “de-risking” rather than “de-coupling”.
Depth and breadth across Asia more broadly
Asia is not China and broader Asia offers depth, breadth and attractive relative macro-fundamentals as 2023 has shown.
- Taiwan and South Korea, rather than China, have been at the forefront of Asian tech momentum.
- Parallels have been drawn between India’s current GDP and where China was in 2006.
- South East Asia continues to reap the benefits of “China-plus-one” supply chain
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