Yoojeong Oh, investment director at abrdn, an investment manager, shares her insights on the outlook for Asian equities in 2024 and outlines her top stock picks.

Although US tech stocks suffered a major setback in August, Yoojeong Oh, investment director of the abrdn Asian Income Fund (AAIF), is optimistic about the outlook for Asian equities in 2024, particularly markets in Taiwan, Singapore and Australia, driven by digitalisation, high tech firms and a strong focus on artificial intelligence.

Oh highlighted how Asian markets were volatile in July due to disappointing economic data, a global tech outage and heightened geopolitical tensions after the US floated tougher trade restrictions on China. Stocks in Taiwan weakened as a typhoon led to the market being closed for several days and the technology sector was hit by US-China trade issues, along with disappointing earnings from heavyweight US tech giants Tesla and Alphabet, the parent company of Google. Stocks in China also dropped after data showed that the economy grew at a slower pace than expected.

By contrast, Oh emphasised how the Singapore equity market outperformed the region over July against a stabilising domestic backdrop and data showing that the economy grew modestly in the second quarter, while headline inflation inched down. Indian stocks continued to rise as the new coalition government led by Prime Minister Narendra Modi announced its first budget which included measures to improve consumption, rural demand and employment.

In early August, there was also a sharp sell-off across Asian markets due to concerns that the US Federal Reserve (Fed) was behind the curve in cutting interest rates after higher US jobless data triggered recession fears. As with the US, the technology sector has borne the brunt of the sell-off on nervousness about elevated valuations, especially in AI-related stocks, and the impact of the US presidential election on geopolitical tensions. Investors are pencilling in two 0.25 per cent cuts at the Fed’s meetings this year.

Nevertheless, Oh is optimistic about the outlook for Asian tech stocks and AI, saying there will be strong memory chip demand over the next two to three years.

abrdn Asian Income Fund (AAIF)
Oh manages the AAIF, which has outperformed the index, and aims to grow its dividends over time. Oh highlighted how the fund proved to be  defensive in August, despite the US tech sell-off. In 2023, the dividend per ordinary share increased by 17.5 per cent, from 10 pence to 11.75p, providing a dividend yield of 5.6 per cent at the end of the year. The net value added (NAV) total return of 2.5 per cent for the year was ahead of the index, which increased by 1.6 per cent on a total return basis.

Oh believes that the outlook is bright due to the broad-based growth across Asia and the strength of the companies in the portfolio. The turnaround in the IT and semiconductor cycle, green transition and nearshoring as a result of geopolitics also benefits companies and countries in Asia.

Oh is underweight in China and India due to its lesser focus on dividends, preferring markets in Taiwan, Singapore and Australia. She is also overweight in Indonesia and Thailand. Top 10 holdings include Taiwan Semiconductor Manufacturing Company (TSMC), the fund’s largest holding at 11.8 per cent. She also invests in Taiwan’s Accton Technology and mobile phone operator Taiwan Mobile. “Twenty per cent of the fund is also invested in small caps, a lot in Taiwan, including Sunonwealth Electric Machine,” she told this news service in an interview. The firm designs and supplies a variety of thermal fans, as well as cooling solutions.

Another top 10 holding is Korea’s Samsung Electronics, the largest global producer of DRAM chips which has benefited from the price increase of DRAM and NAND flash memory chips, driven by demand for generative AI.

Other top holdings include Singapore’s United Overseas Bank and Oversea-Chinese Bank. Oh highlighted how Singapore is a small country with a good growth story. Holdings also include India’s Power Grid, an electric power transmission company, which aims to reach net zero by 2047.

Oh also emphasised the investment opportunities in Australia’s mining companies and banks, saying it is a high-yielding market. She invests in Australia’s BHP, a mining company, as well as Commonwealth Bank of Australia (CBA). Chinese multinational tech firm Tencent is also a top 10 holding.   

Other wealth managers
Other wealth managers are also positive about Asian equities in 2024. Japan’s Nomura Holdings believes that the time has come to add to ASEAN stocks. Nomura is going to upgrade two of its preferred markets in ASEAN, namely Malaysia and Indonesia, to overweight from neutral. Nomura believes that there are local supportive factors too. It funds these by downgrading MSCI China stocks to a neutral, from its long-held tactical overweight which has been a disappointment for Nomura. Cheuk Wan Fan, chief investment officer, Asia at HSBC Global Private Banking, holds an overweight view on equities in Japan, India, and South Korea, where she sees the best opportunities for tapping into Asia’s structural growth themes. Swiss private bank Julius Baer is also optimistic about the outlook for India, Taiwan and South Korea, saying that it expects funds to keep flowing into these countries. See more commentary here and here.