2021 outlook – the Asia view: demonstrating resilience

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MEDIA RELEASE: Paras Anand, Chief Investment Officer, Asia Pacific, at Fidelity International, discusses his outlook for markets in Asia in 2021, and the broader themes to watch in a post-pandemic world.

Key Takeaways

  • Asian economies have proved more resilient than Western counterparts due to their better handling of the outbreak and mixed capitalism models
  • Earnings across the region may benefit from greater stability, more intra-regional reliance, positive regional GDP growth, and US dollar weakness
  • Asia is making some significant progress on sustainability issues, with a number of major economies committing to net zero carbon pledges

Read the full report here.

“Historians may look back on 2020 not only as the year of the Covid-19 pandemic, but also as the year in which Asian economic leadership came to the fore. While all nations have wrestled with the fallout from the virus, and introduced economic and health measures to address it, Asian economies as varied as China, Singapore, Japan and South Korea have demonstrated the benefits of early and continuous containment. 

The outlook for markets in 2021

“In terms of investment opportunities in Asia, our Analyst Survey recently showed that China could lead the way in recovering from the domestic economic effects of the pandemic, perhaps as soon as spring 2021. Chinese GDP is likely to be among the few positive growth figures globally in 2020, as well as in 2021. 

“The Asia region and Japan proved most resilient during the crisis and earnings estimates are projected to remain strong in 2021.

“Winners in 2020 have been, as elsewhere, in the technology and healthcare sectors. The rapid rise of e-commerce in China has been accelerated by the pandemic but there is further room for growth as more areas are digitised and more innovation is domestically driven. Manufacturing has also rebounded from the pandemic closures and is boosting demand for certain commodities and exports from countries such as Germany. 

“At a market level, another major shift is underway. China has progressively opened up its onshore equity and bond markets to foreign investors in recent years through the Qualified Foreign Institutional Investor schemes and Connect programmes. Foreign participation is rising and has had a further leg up in 2020. This is partly due to a further relaxation of controls around onshore inflows. But it also reflects the prevailing macro and policy forces in the wake of Covid-19. China, for example, has chosen not to slash rates to the extent seen in the US. That makes it likely that more global funds will boost their allocation to Chinese assets. Higher Chinese bond yields in a weaker dollar environment could be especially attractive for income-focused investors.

Stakeholder capitalism through an Asian lens

“Some of the headwinds Asia has faced over last ten years are receding. The trend of an ever-stronger US dollar has reversed, while oil prices remain lower than historical averages. At the same time, the structure of Asian economies means there is less of a gap between markets and the real economy than in countries such as the US. As economies in the West start to remake their economic model with an eye on inclusive or responsible capitalism, it could be argued that the mixed capitalism model, much more the norm in Asia, is part of the reason for better alignment of government policy and the corporate sector across several areas. These include the digitisation of the economy, the consideration of social impact and even the management of the pandemic.”

Read the full report here.