China ‘remains unloved’ among Asia’s fund managers — here’s where they’re looking instead, BofA says
The Bank of America released its latest Asia fund manager survey, revealing the most and least favored markets in the region for 2024 — and named one sector “at the helm.” Of the fund managers surveyed, a net 17% expected the Asia-Pacific economy ex-Japan to be stronger in the next 12 months, with most “still in search of an uptrend.” The survey participants comprised 254 people with $691 billion in assets under management. However, four in five are expecting a rise in regional stocks in the next 12 months “on the basis of above-par earnings and supportive policy against a backdrop of fair valuations,” the investment bank’s analysts, led by Ritesh Samadhiya, wrote in a Dec. 19 note. They added that around 34% of the fund managers expect a pick-up in profits in the region in the next 12 months. Overweight tech The fund managers surveyed were mostly bullish about tech for 2024, “consistent with [their] favorable views on the semis cycle,” BofA’s analysts wrote, describing it as the sector “at the helm” in asset allocation. Segments they like include semis, tech hardware and software. They were, on the other hand, net underweight on sectors such as real estate and utilities, which they said “remain out of favor, notwithstanding the retreat in bond yields.” The fund managers are overweight on what they call “tech-heavy” Taiwan and Korea. Taiwan is home to semiconductor giant TSMC and South Korea to Samsung . India also made the fund managers’ top four markets they are overweight on. Forecasts for the South Asian country have been strong. In October, the International Monetary Fund hiked its growth forecast for India to 6.3% for both this year and next. China ‘remains unloved’ The fund managers were notably bearish on China, which sat at the bottom of a list of 12 markets in the region. “Investor interest towards risk assets in China is shockingly low – majority want to play wait-and-watch (34%) or look for opportunities elsewhere (28%), rather than be exposed, given their belief that Chinese households will stay put in a preservation mode,” BofA’s analysts said. The Chinese economy, still reeling from the Covid-19 pandemic and dogged by a real estate debt crisis, has been in a funk this year. Domestic demand has remained weak, with November’s consumer prices falling at their fastest rate in three years . Singapore, Malaysia, Indonesia and Australia are some of the other markets those surveyed were bearish on. Japan ‘atop the country preference list’ Optimism on the Asian giant has waned among the fund managers, with 34% of those surveyed expecting a stronger economy in the next 12 months, down from 65% in November. Nevertheless, it “sits atop the country preference list, as cited by net 45% of investors, with a tilt towards banks and semis,” BofA’s analysts wrote. Japan caught the attention of several investors this year, including Warren Buffett, who said in May that he had raised his stakes in five Japanese trading firms to 7.4% after an April visit to Japan. And the Tokyo Stock Exchange’s company governance reforms have boosted optimism on the country’s market. — CNBC’s Michael Bloom contributed to this report.
