Bullish Bets Shoot Sky High on Asian Assets

Asian stocks and equities have room to sprint

When China shifted to pro-growth strategies in late 2022, global markets received a sugar high. Other Asian assets contend that it’s never too late to join the rally.

Another 20% of the gain in Chinese equities. Furthermore, as demand in the world’s second-largest economy recovers, oil might climb above $100 and copper may reach $10,000. Strategists and money managers have made a slew of predictions. Emerging market equities and selected Asian currencies are likely to gain as well.

The resumption of China’s economic activity is expected to result in a total of $836 billion in excess money. As other major central banks continue to tighten policy, this may help reduce concerns about a global recession. Skeptics, on the other hand, worry that financial markets and the global economy will continue to be dominated by a hawkish Federal Reserve.

Morgan Stanley and Goldman Sachs Group Inc. anticipate the MSCI China Index will increase by around 10%. Meanwhile, Citi Global Wealth Investments expects a 20% gain in 2023, compared to its worldwide competitors.

Others, however, believe that Asian equities will continue to rise even after a bull market starts. South Korean and Taiwanese exporters, as well as Southeast Asian countries that depend on Chinese visitors, such as Thailand, will benefit.

Yet another currency boost is on the way

Since China began relaxing virus limitations in November, the offshore yuan rose by around 6%. According to UBS Global Wealth Management, if economic growth improves above trend into the second half of this year, it might climb to 6.50 per dollar.

The yuan and emerging-market currencies have seen a 60-day correlation gauge climb to 0.70, the highest in five months. Thailand’s baht and the South Korean won, both recipients of Chinese tourism, may benefit from the reopening. In response to increased Chinese demand for copper, the Chilean peso will likely rise too.

Eurizon SLJ Capital’s Alan Wilson is a money manager. According to him, this is a watershed moment for the Chinese economy, its underlying assets, and the broader emerging market universe.