Together with Pictet Asset Management, 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.

Despite the recent stimulus measures in China and India’s fast-growing economy, Yoojeong Oh, investment director of the abrdn Asian Income Fund (AAIF), remains underweight in both countries, due to their lesser focus on dividends. She prefers markets in Taiwan, Singapore and Australia, saying they are the biggest dividend payers, and is optimistic about the outlook for equities in these markets, remaining overweight in Asian high tech firms.

Oh highlighted that Asian markets posted decent returns in September, supported by the start of the US Federal Reserve’s policy easing cycle but with most of the gains occurring in the last few trading days of the month, driven mainly by a sharp rally in China. Despite the rally, Oh remains underweight in China. She also believes that the stimulus measures need a bigger push to revive China’s slowing economy and property woes. “I’m happy to sit on the sidelines to see how the situation evolves,” she told this news service in an exclusive interview.

Nevertheless, with China’s monetary stimulus package looking like it’s having a positive effect on the economy, and more support expected in the form of fiscal measures, Luca Paolini, chief strategist at Asset Management, believes that it’s a good time for him to upgrade Chinese equities to overweight from neutral. And because he thinks the US election is likely to produce a positive result for the country's corporate sector under most scenarios, he has also just upgraded US stocks to overweight. Therefore, he raised US and China equities from neutral to overweight on optimism about both economies, and he downgraded Japanese equities from overweight to neutral on increased political risk.

Despite remaining underweight in Chinese equities, Oh did initiate a new position in September in China Construction Bank (CCB) the second-largest state-owned enterprise (SOE) bank in China, with a strong and stable retail deposit base and low funding costs. Its retail book is heavily weighted to lower-risk mortgages with some skew towards infrastructure loans. Within state-owned banks, CCB has its advantages in retail deposit and mortgages. Along with prudent management, CCB continues to stand out as a relatively better player.

She also highlighted how stocks in Thailand outperformed the region in September as the government initiated some economic stimulus policies. In India, the market was flat and underperformed, despite the World Bank raising its full-year GDP forecast for the country. Taiwan also ended the month flat while the Korean market was one of the few across the region to remain in negative territory, continuing its volatile trend this year.

Oh remains positive about the outlook for the Asian tech sector, despite the recent US tech set back, and sees structural growth in generative artificial intelligence (AI), which might mean multi-year structural demand for data centre content and infrastructure upgrades, boding well for the advanced semiconductor sector. She believes that Asia offers some rich pickings, underpinned by long-term structural growth trends such as the rising middle classes, rapid adoption of emerging technologies and continued urbanisation, enabling bottom-up stock pickers to deliver sustainable returns over the long term.

abrdn Asian Income Fund (AAIF)
Oh manages the AAIF, which has outperformed the index, and aims to grow its dividends over time. 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 asset value (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 also invests in stocks in Indonesia and Thailand. Top 10 holdings include Taiwan Semiconductor Manufacturing Company (TSMC), the fund’s largest holding. She also invests in Taiwan’s Accton Technology and Sunonwealth Electric Machine. 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.

Singapore is a big overweight market for Oh, with top holdings including Singapore’s United Overseas Bank and Oversea-Chinese Bank. Oh highlighted that Singapore is a small country with a good growth story and strong governance. Although she acknowledges that India is a bright spot, she struggles to get exposure to it, and remains underweight in the country. Holdings 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).

Other wealth managers
Other wealth managers are also positive about Asian equities in 2024. Swiss private bank Julius Baer is 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 about Asia.