In a notable display of resilience, Asian equities experienced positive momentum despite the backdrop of a strong US dollar, with markets in Taiwan, the Philippines, and Pakistan outpacing their peers. South Korea, however, lagged behind as its KOSPI and KOSDAQ indices recorded significant year-to-date declines of 15% and 28%, respectively. While there has been little discussion about emerging markets excluding South Korea, it is important to note that South Korea’s upgrade to developed market status has provided the FTSE Emerging Markets Index an advantage over the MSCI Emerging Markets Index, highlighting the shifting dynamics of the region’s investors.
Market activity in Hong Kong and Mainland China was particularly robust, buoyed by strong performance in growth stocks following the release of encouraging economic indicators such as purchasing managers’ indexes, auto sales, and real estate sales for November. Investor optimism was also reinforced by speculations regarding the upcoming Politburo and China Economic Work Conference, expected to take place earlier than usual this year. The anticipated semiconductor export restrictions from the US were largely dismissed by market players, as they did not significantly impact investor sentiments.
Purchasing managers’ index (PMI) releases served as pivotal market drivers, although export orders remained below the growth threshold, suggesting contraction in certain areas. Meituan emerged as Hong Kong’s most actively traded stock despite a modest decline, attributed to a profit-taking scenario after a strong year-to-date performance. The discount retail chain MINISIO stood out with an impressive gain, further validating the preference for Hong Kong-listed shares over their US counterparts.
The consumption sector demonstrated strength, especially supported by several local governments in Shanghai and Guangzhou distributing consumption vouchers to stimulate market activity and consumer confidence. Notably, property sales showed monthly increases in major cities, while new energy vehicle sales also reflected strong demand, particularly for electric vehicles. BYD’s impressive sales numbers contrasted with slight declines from competitors like Li Auto and NIO, highlighting the competitive dynamics in China’s burgeoning electric vehicle market.
Mainland investors significantly contributed to Hong Kong’s market stability, with net inflows amounting to approximately $2.53 billion, predominantly aimed at the Hong Kong Tracker ETF. The substantial participation from Mainland investors underscored their undeterred interest in Hong Kong stocks, even amidst external pressures and tightening financial policies. Further evidencing this trend, comments from new People’s Bank of China Governor Pan Gongsheng emphasized the central bank’s commitment to supporting economic growth, which may continue to bolster investor confidence.
An insightful piece in the Wall Street Journal focused on Lei Zhang, the co-founder of Hillhouse Capital, reflecting the broader trend of Asian investors stepping into the breach left by hesitant US investors. This trend aligns with a growing belief that local and regional capital will reinvigorate the Chinese market, increasingly seen as central to the Asian economy’s recovery and growth narrative. As US represent just a fraction of China’s export market, a shift in investor dynamics could define the evolving landscapes of both regional and global financial markets going forward.
