Investment Opportunities in Asian Markets: 2024 Analysis

The Potential Resurgence of Asian Markets

Asian markets are undergoing a transitional phase that, from Benjamin Graham’s perspective, could represent an important turning point for valuation-conscious investors. When assets depreciate significantly, they often present lower relative risks compared to all-time highs. In this context, the Asia-Pacific region shows signals worth detailed analysis, particularly in the case of the most developed and emerging economies on the continent.

Current Outlook: Asian Giants in Perspective

Global Market Capitalization and Weight of Asian Markets

The region hosts stock exchanges of considerable size. According to recent data, Shanghai leads with a capitalization of 7.357 trillion dollars, followed by Tokyo with 5.586 trillion. The Shenzhen (4.934 trillion) and Hong Kong (4.567 trillion) stock exchanges complete the group of largest volume in Asian markets. Together, the three Chinese stock centers reach approximately 16.9 trillion dollars.

This magnitude places Asian markets in a relevant position, although still below U.S. dominance, which accounted for 58.4% of global capitalization as of 2022. However, the trajectory of these Asian markets requires a historical context: Japan held a 40% market share in 1989, illustrating the cycles of global economic power.

Expansion Beyond China

Asian markets are not limited to China. India, the fifth-largest economy worldwide, has dynamic stock exchanges led by Mumbai, with over 5,500 listed companies. South Korea, Australia, Taiwan, Singapore, and New Zealand represent developed economies with consolidated markets. Simultaneously, emerging nations such as Indonesia, Thailand, the Philippines, Vietnam, and Malaysia demonstrate accelerated growth potential in Asian markets.

Recent Performance and Pressure Factors

Deterioration of Major Indices

The three main performance indicators in Asian markets have recorded significant declines since early 2021. The China A50 has fallen 44.01%, while the Hang Seng has dropped 47.13%, and the Shenzhen 100 has declined 51.56%. This contraction represents an approximate loss of 6 trillion dollars in capitalization from all-time highs.

Roots of Negative Performance

Multiple converging factors have pressured Asian markets:

• The legacy of restrictive health policies and their residual economic consequences
• Stricter regulations on large technology corporations
• Structural crisis in the real estate sector, a fundamental pillar of the regional economy
• Contraction of international demand due to global economic slowdown
• Trade tensions limiting access to critical technologies

These pressures have resulted in more moderate economic growth, away from the double-digit rates that characterized previous decades. The growth recorded in Q4 2023 (5.2%) reflects this new reality in Asian markets.

Stimulus Measures in Asian Markets

Central Bank Intervention

Monetary authorities have implemented reductions in the reserve requirement ratio by 50 basis points, releasing approximately 1 trillion yuan (139.45 billion dollars) for economic injection. Additionally, a stabilization package for Asian markets valued at 2 trillion yuan (278.90 billion dollars) is under discussion, financed through offshore funds from state-owned enterprises.

Interest Rate Policy

The central bank has maintained the one-year preferred credit rate at a minimum level of 3.45% since late 2021, reflecting an accommodative stance focused on stimulating Asian markets.

Deflationary Context

Recent deflationary processes indicate lower domestic consumption, justifying the intensity of measures designed to reactivate Asian markets. However, their effectiveness will depend on more comprehensive coordination among monetary, fiscal, and regulatory policies.

Technical Analysis of Major Indices

China A50: Consolidation in a Downtrend

The China A50 has maintained a downward trajectory since February 2021, when it reached a high of 20,603.10 dollars. It is currently trading at 11,160.60 dollars, 9.6% below its 50-week exponential moving average. The RSI indicator fluctuates below its mid-zone, indicating weak bullish consolidation in Asian markets.

Critical levels to watch include 8,343.90 dollars, 10,169.20 dollars, and 15,435.50 dollars. A sustained break below the moving average would be a bullish signal for Asian markets.

Hang Seng: Sustained Pressure

The Hang Seng index, representing 65% of the capitalization on the Hong Kong stock exchange and comprising over 80 multi-sector companies, is currently trading at 16,077.25 HK$. Like the China A50, it is below its 50-week average. The RSI remains in a bearish consolidation zone, suggesting caution in Asian markets.

Relevant levels are at 10,676.29 HK$, 18,278.80 HK$, and 24,988.57 HK$, the latter considered distant in the absence of significant economic changes.

Shenzhen 100: Maximum Pressure

The Shenzhen 100 shows the most pronounced deterioration among major Asian markets, trading at 3,838.76 yuan, 16.8% below its 50-week average. Since the highs of February 2021 (8,234.00 yuan), it has lost significant ground. The RSI approaches the oversold zone.

Critical supports in Asian markets are located at 2,902.32 yuan and 4,534.22 yuan, representing historical levels where institutional demand could manifest.

Structural Challenges of Asian Markets

Geopolitical Tensions

The region concentrates several potential escalation points: Korean Peninsula, South China Sea, Taiwan Strait, and India-China. The U.S. role as a security ally adds complexity to the stability of Asian markets.

Demographic Dynamics

Aging populations, rapid urbanization, and low birth rates affect medium-term prospects in Asian markets. These trends will exert pressure on social security, labor availability, and competitiveness.

Environmental Transition

The region faces vulnerability to extreme weather events while contributing approximately half of global emissions. The transition to renewable energies presents both risk and opportunity in Asian markets.

Investment Strategies in Asian Markets

Direct Access via Stocks

Large Chinese corporations such as JD.com, Alibaba, Tencent, BYD, and Pinduoduo are listed through ADRs on Western exchanges, allowing direct access to Asian markets without excessive restrictions. These issuers rival Western giants in size, with individual revenues exceeding 150 billion dollars.

State-owned enterprises like State Grid, China National Petroleum, and Sinopec face restrictions for foreign retail investors, limiting direct access to certain segments of Asian markets.

Derivatives as an Alternative

Contracts for difference and derivatives enable indirect exposure to Asian markets without acquiring underlying assets. This mode facilitates speculation with leverage through specialized platforms.

Operating Hours for Asian Markets

Trading Windows from Europe

Residents in European time zones (GMT+1 effective) face a 7-hour difference with Shanghai/Hong Kong/Shenzhen (GMT+8) and an 8-hour difference with Tokyo (GMT+9).

Effective trading hours for Asian markets from Madrid range from 1:00 a.m. to 9:00 a.m., with the interval 2:30 a.m. to 8:00 a.m. being the peak overlap of major Asian markets.

This overlap ensures optimal volume and liquidity for trading in Asian markets, representing a critical window for international traders.

Future Outlook and Recommendations

Asian markets present a transitional landscape where depressed valuations coexist with macroeconomic uncertainties. The role of the state in these economies could limit future growth potential, a critical factor for assessing investment horizons in Asian markets.

The key for investors interested in Asian markets is to monitor fiscal, monetary, and regulatory policy announcements. Coordinated improvements in these areas, along with structural reforms, could catalyze a significant recovery. Conversely, the absence of substantial changes would maintain pressure on valuations.

Asian markets offer opportunities but require active vigilance and evidence-based decisions rather than sentiment. This is the right framework to approach this region during 2024 and beyond.