INVESTORS in Asia need to be active in managing their portfolios this year, given the wider themes at play that could lead certain individual stocks to outperform the indices of which they are a part.
This is the advice from Vis Nayar, chief investment officer of Eastspring Investments, the US$271 billion Asia-based asset management arm of Prudential. The different trajectories in Chinese and Indian equities over the past few years have made index investing tricky, especially for those tracking indices covering emerging markets (EM).
On Wednesday (Jan 22), Nayar said: “China is a big part of EM as is India, so for index investors, the big challenge in the last number of years has been that China and India went in opposite directions.” This is in contrast to the US, where index investors had an easier time, given that growth was spurred mainly by Big Tech.
With value being the key investment theme for China, Nayar said investors need to be sure that the drivers for buying cheap Chinese stocks are separate from those for the property sector, which remains a drag on the growth of Asia’s largest economy.
As attention is focused on the upcoming National People’s Congress (NPC) meeting in March, Nayar said Beijing would need to deliver meaningful policy changes that remove the excess supply in China’s property market, to convince investors that the government is tackling the key problems. Investors are widely expecting that Beijing would unveil stimulus measures at the meeting of the NPC, China’s most powerful state organ.
China presents a “fiscal wildcard”. Nayar pointed out that despite the more positive outlook and the faster growth in India than in China, Chinese equities outperformed their South Asian peers last year. That stemmed mostly from the price action in the last few months of 2024, in response to a series of stimulus measures China announced. Still, Nayar noted that investors remain interested in India as it remains a long-term structural play. “How many of those exist in the world today?” he asked.
Eastspring Investments joins other financial institutions that are positive on India. Swiss private bank Julius Baer said earlier this week that India’s demography makes it an attractive investment; Citi Wealth was also bullish on Indian equities in a briefing at the start of this month.
Turning to the individual sectors, Eastspring’s Nayar said artificial intelligence would remain a long-term theme. He noted that the full supply chain is much wider than just the Magnificent Seven stocks in the US. This would include companies in China and Asia that are in the hardware space as well.
