Opportunities in Asian Markets: Investment Guide 2024

Benjamin Graham’s philosophy on asset valuation reminds us of a fundamental lesson: the lower a stock’s price, the less risk the investor assumes. Based on this premise, Asian markets currently present a particularly attractive outlook for those seeking to identify strategic entry points.

The Current Reality of Asian Stock Markets

The epicenter of attention in Asian markets focuses on the structural and cyclical challenges faced by the Chinese economy, whose authorities are working to implement corrective measures. The numbers tell a compelling story: since reaching highs in 2021, the three main Chinese stock exchanges have experienced a capital destruction of nearly $6 trillion.

During the period 2021-2024, the results of the major indices have been severe. The China A50 has fallen 44.01%, the Hang Seng 47.13%, and the Shenzhen 100 51.56%. These contractions reflect a combination of complex economic pressures: the failure of the total lockdown strategy against COVID-19, regulatory tightening on tech companies, the real estate sector crisis, contraction of global demand, and escalating trade tensions with the United States, particularly restrictions on semiconductor exports.

Authorities’ Response: A Recovery Plan

Measures implemented by the PBOC represent an attempt to inject liquidity into the financial system. The central bank announced a 50 basis point reduction in the Reserve Requirement Ratio, freeing approximately 1 trillion yuan. Simultaneously, a bailout package valued at 2 trillion yuan is being discussed, financed through offshore accounts of state-owned corporations.

Additionally, the prime lending rate has been lowered since late 2021, stabilizing at 3.45%. These actions reflect efforts to stimulate growth, although their delayed timing raises questions about their effectiveness. China’s economy grew 5.2% in Q4 2023, a figure below projections but indicating a very different pace from the historic double-digit growth.

Mapping Asian Markets: Size and Global Relevance

Asian markets encompass the stock exchanges operating in the Asia-Pacific region, the largest and most populous on the planet. Over recent decades, we have seen a gradual but significant shift of economic dynamism toward this continent.

China hosts three of Asia’s largest stock exchanges, with combined market caps of $16.86 trillion: Shanghai (7.36 trillion), Shenzhen (4.93 trillion), and Hong Kong (4.57 trillion). Although the Tokyo Stock Exchange was historically the largest Asian market for decades, Japan’s stagnation allowed Shanghai to surpass it. India, as the fifth-largest economy globally, has important stock markets, with Mumbai being the most relevant, listing over 5,500 companies.

Intermediate-sized developed countries like South Korea, Australia, Taiwan, Singapore, and New Zealand complement the ecosystem. Simultaneously, emerging economies such as Indonesia, Thailand, the Philippines, Vietnam, and Malaysia have elevated their profiles as investment destinations.

Geopolitical and Demographic Context

The region faces four main structural challenges that will shape its trajectory:

Geopolitical instability: Tensions in the Korean Peninsula, South China Sea, Taiwan Strait, and China-India border pose latent risks that could escalate into trade or military conflicts. The role of the United States as a strategic ally adds complexity to the regional landscape.

Growth slowdown: China, the regional economic engine, will maintain more moderate growth rates. This will have secondary effects on economies dependent on trade, investment, and tourism with the giant. The post-pandemic recovery is still not fully complete.

Accelerated demographic transition: Aging populations, intensive urbanization, and changes in labor dynamics exert pressure on social security systems, environmental sustainability, and the availability of specialized talent.

Climate vulnerability: The region faces increasing risks from extreme weather events and contributes significantly to global emissions. Balancing development with energy transition is a strategic imperative.

U.S. Hegemony vs. Asian Rise

Despite the growing importance of Asian markets, the United States maintains undisputed leadership in global capital markets, accounting for 58.4% of the total worldwide in 2022. This position reflects decades of sustained growth during the 20th century and the strength of its institutions.

However, it is instructive to remember that Japan reached a 40% share in 1989, surpassing even the United States, before its prolonged decline. The most important Asian markets — Japan, China, and Australia — together account for just 12.2% of global capitalization, a figure that should be viewed within secular trends.

Technical Analysis of Major Indices

China A50: Persistent Downtrend

The index tracking the 50 largest A-shares is currently at 11,160.60 USD, well below its all-time high of 20,603.10 in February 2021. The price remains 9.6% below its 50-week exponential moving average (12,232.90 USD). The Relative Strength Index fluctuates below its mid-level, indicating bearish consolidation.

To confirm a trend reversal, a sustained break above the moving average accompanied by a change in RSI slope is needed. Key support levels are at 8,343.90 USD (2015 lows) and 10,169.20 USD (2018 lows).

Hang Seng: Similar Weakness Pattern

The Hong Kong index, reflecting the performance of over 80 companies, trades at 16,077.25 HK$, below its long-term bearish trend. The momentum indicator confirms downward pressure. Relevant resistance levels are at 18,278.80 HK$ and 24,988.57 HK$, the latter significantly distant from current quotes.

Shenzhen 100: Technical Oversold

This index of the top 100 A-shares trades at 3,838.76 yuan, with a 16.8% gap from its 50-week average. The RSI approaches oversold territory (30), suggesting a possible technical rebound. Main support levels are at 2,902.32 yuan (2018) and 4,534.22 yuan (2010).

Opportunities for Direct and Indirect Investment

To access Chinese companies directly, retail investors can purchase U.S. Depositary Receipts (ADRs) of firms like Alibaba, JD.com, Tencent, Pinduoduo, or BYD through Western platforms.

However, restrictions exist on direct purchase of A-shares by foreign investors, especially for state-owned enterprises in sectors like energy, utilities, or finance. Alternatively, Contracts for Difference (CFDs) offer indirect exposure without acquiring the underlying asset, allowing speculation on Asian indices such as China A50, Hang Seng, or Shenzhen 100.

Conclusion: Strategic Vigilance

Asian markets are currently under pressure but also under close watch for potential positive catalysts. The key is to carefully monitor announcements related to monetary, fiscal, and regulatory policies. The timing of effective stimulus measures could turn the current depressed valuation landscape into a bullish inflection point.

For investors seeking regional exposure, a strategy based on rigorous analysis of economic indicators, political decisions, and disciplined execution is essential. Opportunities exist, but patience and selectivity are required.