Duncan Robertson

Market Outlook

Q3 Asia Outlook

Outlook

Latest Asian economic and market outlook. 

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We continue to be broadly positive on the outlook for Asian equities. The earnings picture remains strong and its principal driver, the AI data-centre capital expenditure cycle, appears intact. Seasonality should also become more favourable over the coming weeks. Nevertheless, we continue to monitor the risks from higher oil prices, inflation and global bond yields, all of which could weigh on risk appetite.

During September the team travelled to Taiwan and India, as well as attending the CLSA forum in Hong Kong. The trip to Taiwan confirmed the strong momentum in the AI data centre capex cycle, a theme to which we retain significant exposure, but where we have lately been taking some profit on valuation grounds.

We came away from the Indian trip with renewed conviction in the market and the sense that the only thing wrong with India is that it lacks exposure to the AI thematic. Bank credit growth has accelerated to 19% YoY. The Foreign Currency Non-Resident (Bank)  investment scheme has been a resounding success – so much so that they closed it early – and the system is awash with liquidity. Property sales have picked up. Auto sales remain healthy with 4W sales up 22% YTD YoY and the various consumer companies that we saw faring well too. There are also signs of private sector capex picking up, especially in the power sector. Meanwhile, the government continues to be focused on manufacturing, increasing exports, and increasing domestically produced content in the manufacturing sector.

At the CLSA forum, we focused substantially on China. We still see little reason to be excited about the country at a macro level. However, the meetings we had brought forward several ideas worthy of further work, which is what we are focused on at present.

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