HSBC Global Private Banking has identified four top investment themes to capture the attractive growth and income opportunities in Asia, the banking unit said in a statement on Monday.

These are the themes:
(1) Reshaping Asia’s Supply Chain

“We launch this new high conviction theme, as the driving forces of geopolitical tensions, trade fragmentation and technology restrictions are accelerating global supply chain diversification across the region,” James Cheo, Chief Investment Officer, Southeast Asia and India, Global Private Banking and Wealth, HSBC said.

“To mitigate geopolitical risks and alleviate the impact of trade tariffs, western multinational corporates implement the ‘China+1 strategy’ by building new production facilities in India and ASEAN to supplement their supply chain in China,” he said.

“This theme focuses on North Asian industry leaders which have successfully diversified their supply chains beyond China to enhance competitive edges. We also identify geared winners in India and ASEAN which gain from strong FDI inflows driven by supply chain reconfiguration,” he added.

(2) Rise of India and ASEAN

“We see promising secular growth opportunities in India and ASEAN, riding on the structural tailwinds from strong foreign and domestic private investments, young demographics, the technology boom, and green transformation. India has consistently delivered stronger-than-expected growth in manufacturing and service activities throughout 2023, with strong FDI inflows and booming services exports powering employment, private consumption, and productivity gains. 40 percent of the world’s Global Capability Centers are in India, offering a strong boost to the country’s service exports and the job market,” said Cheo.

Indonesia offers solid growth and is one of the more favorable investment stories in Asia, supported by its large, young, and growing population, with rapid urbanisation and robust private consumption being the key growth engine. Indonesia further benefits from upgrading of its manufacturing value chain. The country’s abundant reserves of green minerals and metals are vital inputs for the EV and battery industries. Indonesia holds the world’s largest nickel reserves with an estimated 21 million tonnes or 22 percent of global reserves,” he noted.

(3) Future Asian Consumer

“Driven by rising Asia wealth and middle-class consumers, Asia’s consumer discretionary sector stands out as a bright spot, including select Chinese e-commerce leaders, Asian consumer discretionary companies, AI-driven and digital consumption and Asian financial services providers. This high conviction theme focuses on Asia’s consumer discretionary sector which is projected to deliver 16.4percent earnings growth in 2024 despite the high comparison base last year,” added Cheo.

(4) Capturing Peaking Asian Yields

“We focus on locking in attractive yields from quality Asian bonds. We favour Asian financials, Indian local currency bonds, Indonesian quasi-sovereign IGs, Korean IG bonds, Macau gaming and Chinese TMT credits. The all-in yield of the Asian IG bond index is attractive at around 5.4 percent, above the 3-year average of 4.5 percent,” Cheo
pointed out.

“Disinflation is on track in most Asian economies, with inflation now expected to return to central bank target ranges in 2024 in most countries, ahead of most other regions. We believe Asian yields are peaking and expect policy rate cuts in Australia, mainland China, Hong Kong, India, Indonesia, South Korea, the Philippines and Singapore in 2024 to bring policy tailwinds for the Asian bond markets in the coming year,” said Cheo.

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