Investing in Emerging Markets: Asia Shines as a Lucrative Option
In the past, investors tended to overlook emerging markets like Asia due to relatively lower returns compared to other regions. However, the landscape is poised for significant changes in the next five years. With Asia accounting for a whopping 70% of global GDP, we anticipate more favorable returns that are in line with the region’s growth.
Many emerging markets within Asia have exhibited remarkable growth and allure for investors. India, for instance, boasts an impressive GDP growth rate of 6.0%, placing it among the top performers globally. Meanwhile, countries like China have maintained low inflation rates, with a mere 0.2% increase observed in June. Furthermore, the trend of shifting production bases for new technologies to nations such as Vietnam and Thailand opens up promising opportunities for investors.
Expert Insights
“Trawut Luangsomboon,” CEO of Asset Management Company Limited and Wealth of Chitta, highlights the potential of emerging market stocks in Asia. He predicts that, over the course of the next five years, these stocks will outperform other asset classes, with average returns expected to be around 11% per annum. Particularly, India is anticipated to deliver the highest returns compared to other countries in the region.
The trajectory of India’s economy in 2023 is poised for sustained growth. Despite recent interest rate hikes by the US Federal Reserve impacting several global economies, India is projected to grow by 6% this year, surpassing China’s growth. This optimistic outlook stems from factors such as lower energy prices, improved supply chain conditions, and a robust employment market.
A closer look at India’s sector performance reveals reassuring trends. Rising product prices contribute to increased profitability, while corporate debt levels tend to decrease. The banking sector, in particular, exhibits a strong balance sheet, indicating a potential recovery in the investment climate.
Top Performers in the Indian Stock Market
Jitta.com ranks the top five Indian stocks based on their revenue growth as of 25th July 2023. These companies include State Bank of India, West Coast Paper Mill Limited, Bank of Baroda Limited, Andhra Paper Limited, and GHCL Limited. Each of these companies experienced revenue growth ranging from 13.01% to 51.98% in 2022 compared to the previous year.
“Wajana Wongsupasawat,” Deputy Managing Director of Investment Management Division at Kasikorn Asset Management Co., Ltd., emphasizes the potential for gradual improvement in emerging market economies in the second half of this year. He advises investors to focus on countries with robust domestic factors, such as India, which heavily relies on domestic consumption. Wongsupasawat has revised his outlook on the Indian stock market to slightly positive from neutral, considering its solid economic fundamentals. With India’s economy primarily driven by domestic consumption and boasting the world’s largest population, GDP growth is anticipated to continue positively for the next two years, surpassing the 6% mark.
Moreover, India’s interest rate hike is expected to cease, following a decline in inflation. Presently, the policy interest rate of 6.5% significantly surpasses the inflation rate of 4.8%. This factor, coupled with India’s lowest trade deficit in nearly two years and substantial international reserves, ensures greater stability for the Indian currency.
The Indian stock market has demonstrated impressive performance, outpacing its Asian counterparts with an 8% gain since the beginning of this year. Notably, domestic investors have played a pivotal role in boosting market confidence, helping minimize volatility during foreign currency outflows.
However, high stock prices in India pose a higher level of risk, potentially dissuading some investors. Yet, it is vital to consider the exceptional profit growth unique to the Indian market. Currently, Indian stocks are priced reasonably, presenting viable investment opportunities. Given that Indian stocks occupy a relatively small percentage of global stock indices, approximately 1.5%, we recommend including a portfolio allocation of 5-10% for Indian stocks.
In the past, investors may ignore investing inan emerging marketLike Asia, from returns that may still be lower than assets in other regions of the world. Be it stocks or bonds. Despite Asia’s growth accounting for 70% of global GDP, we believe we will see more pronounced changes in the next 5 years. The returns in Asia will be more similar to the region.
Many emerging markets have shown remarkable and attractive growth, such as India (6.0%), with one of the world’s best GDP growth rates, or countries with low inflation, such as China, which have only increased 6.0% 0.2% in June or the trend of expanding the production base of new technologies flowing to Vietnam or Thailand more
“Trawut Luangsomboon” CEO of Asset Management Company LimitedWealth of Chitta He said:emerging market stocks“In Asia, returns are expected to outperform other asset classes over the next five years, with average returns expected to be around 11% per annum, particularly in India. It is expected to have the best returns compared to other countries in the region.
The direction of the Indian economy in 2023 is likely to continue growing. Although the US Federal Reserve’s recent interest rate hikes have affected some global economies. The Organization for Economic Co-operation and Development (OECD) has forecast India’s growth this year to grow by 6%, outperforming China, driven by factors such as lower energy prices, easing supply chain issues, and strong employment .
Regarding the performance of the sector in India, There is still a good trend More profit is obtained from rising product prices while corporate debt tends to decrease. especially the banking sector which has a strong balance sheet. Shows the potential for the recovery of the investment climate in a better direction.
by “Indian stocks The top 5 in Jitta.com found good revenue growth and was ranked on 25 July 2023 in the following order: State Bank of India, West Coast Paper Mill Limited, Bank of Baroda Limited. , Andhra Paper Limited and GHCL limited. In 2022, all companies recorded an increase in revenue from the previous year at 13.01%, 45.69%, 24.24%, 51.98% and 48.93% respectively.
“Wajana Wongsupasawat” Deputy Managing Director of Investment Management Division Kasikorn Asset Management Co., Ltd. He said in the second half We see that there is a chance that the economies of emerging markets will improve gradually. It is advisable to invest in countries where domestic factors are strong. of domestic use such as India
and revised his outlook on the Indian stock market to Slightly Positive (from Neutral) in terms of economic fundamentals. India is quite amazing. With the structure of the economy focused on domestic consumption Also, with the largest population in the world, GDP is expected to grow well this year. and will be able to grow more than 6% for at least another 2 years
In addition, India’s interest rate hike is expected to end. After inflation continues to fall The current policy interest rate of 6.5% is significantly higher than the inflation rate of 4.8%, another factor that makes the investment picture in India look better. The lowest trade deficit in almost two years, along with India’s high international reserves. makes Indian currency more stable
The “Indian stock market” has gained around 8% since the start of the year, outperforming other markets in Asia. In recent short period Inflows from domestic investors are playing more role in Indian stock market. Helps reduce market volatility during the outflow of foreign currency.
However, India’s risk is a relatively high stock price causing investors may not dare to invest again But if you consider the profit growth, it is also high, which is unique to the Indian market.
The current price of Indian stocks is considered reasonable. and can invest Given the relatively small percentage of Indian stocks in global stock indices, which is around 1.5%, we recommend a portfolio of 5-10% Indian stocks.
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