Willem Sels, global chief investment officer at HSBC Global Private Banking and Wealth, discusses the positive story in Asia, notably India, Indonesia, South Korea and Japan.
Willem Sels at HSBC Global Private Banking and Wealth highlighted this month that he is continuing to diversify in Asia, believing that it could take time before stimulus boosts actual economic growth in China. Instead, he is looking towards India, Indonesia, South Korea and Japan for better returns.
He sees further upside and diversification potential in Japan, believing that it is well placed to tap into automation and digitalisation opportunities, so he has recently increased his exposure to Japan.
The firm has overweight positions in India, Indonesia, South Korea and now also Japan, he said.
Sels expects consumption in Japan to be supported by wage hikes, a tourism boom and the sustained reflation trend. He favours high-end manufacturing leaders in Japan, South Korea and Taiwan, given their roles in the global semiconductor supply chains.
Sels also sees secular growth opportunities in India and ASEAN, riding on the structural tailwinds from strong foreign and domestic private investments, young demographics, the technology boom and green transformation.
Sels highlighted that Asia is on track to deliver above-global average 2024 GDP growth of 4.5 per cent based on HSBC forecasts, supported by upside surprises from India’s growth, the expansion of the ASEAN economies and more decisive policy stimulus from China.
Driven by rising Asian wealth and middle-class consumers, Sels believes that Asia’s consumer discretionary sector stands out as a bright spot. The wider adoption of AI-driven emerging technologies should transform the digital consumption experience, benefiting e-commerce, IT hardware and AI-related companies, he said.
Sels thinks that Asia plays a big role in the net zero transition, saying that China has invested four times as much as the US in the energy transition. He said that Indonesia is playing a critical role in the global electric vehicle supply chains because it holds the world’s largest nickel reserves with an estimated 21 million tonnes or 22 per cent of global reserves. He also likes quality Chinese industry leaders which have diversified their supply chain outside China. Many of them are building significant production capacities in Southeast Asia in order to benefit from the large and young working populations to improve cost advantages, he said.
Sels also thinks that Indonesia offers an exciting structural growth story within ASEAN, due to its young and growing population. Rapid urbanisation and robust private consumption are key growth factors for the Indonesian economy.
Focusing on locking in multi-year high yields from quality Asian bonds, Sels favours Japanese and Korean financials and investment-grade corporate bonds, Indian local currency bonds, Indonesian quasi-sovereign IGs, Macau gaming and Chinese TMT credits. He has also warmed to equities in recent months, saying that the firm is slightly more overweight in Asian equities than bonds.
“Asia remains an important engine of global growth, and we capture structural growth opportunities through our themes focusing on the beneficiaries of the global supply chain reorientation, the rise of India and the ASEAN region, and future middle-class consumers,” Cheuk Wan Fan, chief investment officer for Asia at HSBC Global Private Banking and Wealth, said.
RBC Wealth Management also maintains its overweight position in Japanese equities.See further commentary on the outlook for Japan and India here and here.
