Opportunities and Risks in Asian Markets: A Guide for 2024

The Current Landscape of Asian Markets Under Pressure

Over the past three years, Asian financial markets have experienced a significant correction. The continent’s three main stock exchanges—Shanghai, Shenzhen, and Hong Kong—have lost approximately $6 trillion in market capitalization since reaching their peaks in 2021. This widespread decline results from multiple interconnected factors affecting the regional economy.

If we look at the performance of the main indices between 2021 and 2024, the numbers are compelling: the China A50 index has fallen by 44.01%, the Hang Seng by 47.13%, and the Shenzhen 100 by 51.56%. Although these figures may seem alarming, from a fundamental analyst’s perspective, they present a scenario where assets have become considerably less expensive and potentially more attractive to patient buyers.

What Is Really Happening in the Chinese Economy?

The contraction in Asian markets, particularly in China, is due to a combination of structural and cyclical tensions. Among the most relevant are the impact of previously implemented restrictive policies, regulatory pressure on the tech sector, the deterioration of the real estate market—historically the growth engine—and the slowdown in global demand.

Additionally, trade confrontation with Western powers has limited access to critical technology, forcing strategic rethinking. The most immediate consequence is that China’s economic growth has fallen from double digits to more modest rates, around 5.2% in the last quarter of 2023, below many expectations.

Foreign direct investment has begun migrating to alternative emerging markets such as India, Indonesia, and Vietnam. Simultaneously, the region faces severe demographic challenges: an aging population, declining birth rates, and a gradually contracting labor market in the coming years.

Economic and Monetary Policy Responses

In response to this scenario, Chinese authorities have activated multiple instruments to inject liquidity and restore confidence. The People’s Bank of China reduced the reserve requirement ratio for banks by 50 basis points, releasing approximately 1 trillion yuan—almost $140 billion—that aims to stimulate economic activity.

More significantly, a market stabilization package of around 2 trillion yuan (about $280 billion) is currently under discussion. This fund, financed with resources from offshore accounts of state-owned enterprises, would be used for stock purchases to counteract the massive sell-offs that have characterized Chinese stock markets.

Meanwhile, the preferred lending rate has remained at its lowest levels since late 2021, currently at 3.45%. The deflationary environment accompanying these measures reflects weak domestic demand, adding urgency to these interventions.

The Map of Asian Financial Markets

Asian markets extend far beyond China. The Asia-Pacific region hosts some of the world’s most dynamic economies and stock exchanges:

Shanghai Stock Exchange leads with a market capitalization of $7.357 trillion and hosts the largest concentration of listed companies on the continent. Tokyo maintains a significant position with $5.586 trillion in market cap, although its relative share has decreased compared to past decades. Shenzhen and Hong Kong complete the top four with $4.934 trillion and $4.567 trillion respectively.

Together, Chinese markets account for $16.9 trillion in market capitalization. India, with its Bombay Stock Exchange, and markets like South Korea, Australia, and Taiwan form the second tier of importance. Finally, emerging economies such as Indonesia, Vietnam, Thailand, and Philippines show accelerated growth dynamics, albeit with associated volatility.

Structural Challenges of the Asian Continent

Asian financial markets must navigate four major challenges that will shape their trajectory in the coming decades:

Geopolitical tensions: The region is the epicenter of multiple potential conflict hotspots—Korea, the Taiwan Strait, the South China Sea, and India-China tensions—whose escalation could impact trade flows, investment, and market confidence.

Slowing economic growth: Although China remains the regional engine, its moderate growth has secondary effects on economies dependent on trade and tourism with the country. Post-pandemic recovery remains incomplete in several sectors.

Demographic changes: Population aging, pressures on social security systems, shortages of skilled labor, and skills gaps pose challenges that require sustained public policy responses.

Environmental pressure and climate change: The region contributes significantly to global emissions and is vulnerable to extreme weather events. Balancing economic growth with transitions to renewable energy is imperative.

Global Context: Asia’s Relative Position

Globally, Asian financial markets account for approximately 12.2% of total market capitalization, a figure that warrants historical context. The United States holds 58.4% of global markets, reflecting its growth trajectory during the 20th century and the strength of its institutions.

However, recent history shows dynamic shifts. Japan held a 40% share in 1989—surpassing the US—before entering a prolonged stagnation period. This trajectory suggests that global market positions are dynamic and can change significantly over one to two decades.

Technical Analysis: Readings of Major Indices

China A50 Index

This indicator tracks the 50 largest and most liquid A-shares from Shanghai and Shenzhen. Currently trading at $11,160.60, it maintains a downtrend initiated in February 2021 when it reached an all-time high of $20,603.10. The price is approximately 9.6% below its 50-week exponential moving average.

The Relative Strength Index (RSI) oscillates in a consolidating bearish territory, below the neutral zone. Key support levels are at $10,169.20 (2018 lows) and $8,343.90 (2015 lows). A trend reversal would require a sustained break below the moving average accompanied by a change in RSI.

Hang Seng

Covers about 65% of Hong Kong’s total capitalization and includes over 80 companies from various sectors. Currently trading at HKD 16,077.25, also below its 50-week average. The RSI behavior confirms bearish consolidation. Next resistance levels are at HKD 18,278.80 and HKD 24,988.57.

Shenzhen 100 Index

Tracks the performance of the top 100 Shenzhen A-shares. Since its all-time high of 8,234.00 yuan in February 2021, it has fallen to 3,838.76 yuan—16.8% below its 50-week average. The RSI approaches oversold territory, suggesting potential for a technical rebound. Critical support levels are at 2,902.32 yuan (2018) and 4,534.22 yuan (2010).

Investment Avenues in Asian Markets

Direct Shares of Asian Companies

Major contemporary Chinese corporations compete on a scale with Western giants. Companies like JD.com (e-commerce), Alibaba (digital platforms), Tencent (technology and entertainment), and BYD (electric vehicles) are traded via ADRs on Western exchanges, allowing relatively direct access for retail investors. These companies represent the new Chinese business model, different from traditional large state-owned enterprises.

However, purchasing A-shares of Chinese companies faces significant restrictions for foreign investors, limiting direct access to much of the universe of opportunities.

Derivatives and Indirect Operations

For those wishing to speculate without acquiring the underlying asset, derivatives such as Contracts for Difference (CFDs) allow access to Asian indices, futures, and stocks with leverage, operable through specialized platforms.

Conclusions: Where to Focus

Asian financial markets are in a transitional phase. Price corrections have made valuations more attractive, but recovery will critically depend on: (1) the effectiveness of announced monetary and fiscal stimulus measures, (2) regulatory framework changes enabling greater business dynamism, and (3) regional geopolitical stability.

For investors and interested parties in Asian markets, systematic monitoring of economic policy announcements, corporate earnings cycles, and activity indicators becomes essential. The current landscape presents significant risks but also opportunities for those who understand that lower prices can become attractive entry points when fundamentals improve.