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Bloomberg
November is turning out to be the best month for Asia stocks since early 1990s relative to their global peers.
The MSCI Asia Pacific Index jumped 14% this month, set for its biggest jump since 1998, as benchmarks in markets from Hong Kong to the Philippines saw strong gains that cracked records held for at least a decade. The MSCI All Country World Index is up less than 6%.
Asia’s surge has been driven by growing signs that China is easing its Covid-Zero policy, and expectations that the Federal Reserve will move toward a slower pace of rate hikes. Asset managers are arguing this is only the start, making the case for the outperformance to continue into 2023 after the region lagged global peers for months.
“Relative to other EMs, we have much stronger balance sheets at sovereign and corporate levels, more prudent policy making, and positive structural reforms in a few
key countries,†Peter Monson,
portfolio manager at Nikko Asset Management, said in an interview.
Foreign funds bought $12.6 billion worth of shares on a net basis in emerging Asia excluding China this month, the biggest inflows in two years, according to data compiled by Bloomberg.
Taiwan accounted for nearly half of the flows, as foreign investors including Warren Buffett bet on chipmakers amid easing tensions between China and the US.
Traders also piled back into Chinese assets, spurred first by rumours spread early this month over a Covid-Zero exit plan, and then as the authorities introduced measures underlining an intent to relax restrictions. A slew of policy aid for the troubled property sector also helped.
There was a “dramatic change in market sentiment, with policymakers in China unleashing different sets of policy support,†said David Townsend, managing director of EMEA Business at Value Partners group.
Goldman Sachs Group Inc. expects a further stock rally in China and South Korea while Morgan Stanley has touted a 14% increase for the MSCI China Index next year.
Chinese Stocks in
Hong Kong Jump
Chinese stocks rallied again on Wednesday as the lifting of lockdown restrictions in parts of some districts added fuel to reopening bets that have driven this month’s historic rally.
The Hang Seng China Enterprises Index jumped 2.2% to take November’s gain to 29%, its best for any month since late 2003. The benchmark Hang Seng Index surged almost 27%, the most since 1998. Stocks that benefit from a reopening jumped, including airlines and restaurant operators.
Sentiment toward the nation’s assets has markedly improved this month as Beijing loosened some of its hardline virus approach and lent more support to the property sector. The shift has spurred hopes that China is laying the grounds for an eventual Covid Zero exit, prompting traders to place bets even as a spike in infections and nationwide protests suggest the path to reopening will be rocky.
Stocks extended gains Wednesday afternoon following an announcement that local governments of Panyu, Liwan, Tianhe and Baiyun have lifted lockdown restrictions in parts of the four districts, though some areas still face stringent restrictions.
US-listed Chinese stocks are also headed for their best month ever, with the Nasdaq Golden Dragon Index up 30% this month, a dramatic turnaround from October’s 25% plunge. The CSI 300 Index of mainland shares gained nearly 10% in November.