Duncan Robertson

Market Outlook

Asia Outlook

Outlook

Latest Asian economic and market outlook. 

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Our core view remains unchanged; inflation is gradually falling and growth is holding up reasonably well, which makes for a Goldilocks environment. Consequently, we are generally positive on markets as this is typically a good backdrop for equities. We remain very constructive on India, but have looked to harvest some profits, particularly in Financials, where we are significantly overweight and where many of our holdings have performed well recently. On the flip side, after reviewing the Indian hotel space, we added to Lemon Tree after a minor pullback allowed us to top up at a sensible level.

Elsewhere we are finding more value in ASEAN, particularly Thailand. Although we are not overly bullish on Thailand in a macro sense, it is home to many global or regional businesses such as Mega Lifesciences, which currently represent significant value in our view.

Finally, we have continued to add to Korea as we remain extremely constructive on the memory cycle. Demand for High Bandwidth Memory (HBM) is growing rapidly due to its use in AI servers, and it is expected to represent 30% of global DRAM value by 2025. HBM is also far more profitable than conventional DRAM. With producers scrambling to respond to this new reality, is it predicted that 20% of global wafer capacity will be converted to HBM capacity by the end of the year. Because HBM has a lower yield than conventional memory, this transition means that conventional DRAM production capacity is predicted to fall by almost 40% from 2022 levels by 2025. The supply shortage should be beneficial for memory manufacturers such as Samsung Electronics and SK Hynix, where we have exposure through our holding in SK Square. The second-order effect should be beneficial to equipment manufacturers, since chipmakers will need to significantly increase capacity in 2025 and 2026 to meet demand. Finally, as that capacity is ramped up, the process materials suppliers should benefit. We have continued to add to a range of beneficiaries of these trends.

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Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

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