Looking to ride the Asia-Pacific rally? Here are analysts’ top markets to invest in 2024

Asia-Pacific markets rose to new highs in 2023, with Japan’s Nikkei 225 emerging as the top-performing equity index. The region is expected to continue its good run into the next year as well.

So, which markets will outperform in 2024?

According to analysts that spoke to CNBC, Asia-Pacific’s top-performing markets in the first half of 2024 will be India, Japan and Vietnam — here’s why.

The benchmark Nifty 50 index gained 20% in 2023, and hit a string of record-highs.

India’s economic growth is expected to outpace other major Asian economies in 2024, with the International Monetary Fund projecting the country’s real GDP to expand by 6.3% this year, the same rate as is expected for 2023.

India’s growth prospects have been a powerful driver for its stocks at a time when its neighbor and the region’s biggest economy, China, was seen struggling to meet its target of 5% GDP growth for 2023.

Indian stock markets have also benefitted from strong earnings, imminent interest rate cuts and greater participation from domestic investors. All of which are expected to carry the Nifty 50’s record rally into the next year.

The wildcard for 2024 will be the country’s general elections. Strategists from J.P. Morgan said in a note that they see the Nifty 50 hitting 25,000 next year, if the ruling nationalist Bharatiya Janata Party retains power.

The target of 25,000 represents a more than 15% upside from the index’s last close of 21,710.

However, JPM warned that “if the general election results are unexpected, along with a global recession, geopolitical tensions, higher oil prices, or higher domestic unemployment,” the Nifty could fall to 16,000.

Japan’s Nikkei 225 was the top performing stock index in Asia last year, and analysts believe the country’s equity markets have more room to run in 2024.

The rally in Japan stocks saw the the blue-chip Nikkei 225 gaining 28% last year and the broader Topix ending 25% higher.

Japanese stocks were boosted by strong earnings and growing hopes that the Bank of Japan may finally end its ultra easy monetary policy after decades of near-zero interest rates.

Masashi Akutsu, a strategist at BofA Global Research said he expects the rally in Japan markets to continue well into 2024, also noting a rise in foreign investments.

Strategists at BofA see the Nikkei 225 touching 37,500 by the end of 2024. The index currently trades at around 33,464.17.

Akutsu said technology and banks were BofA’s top picks for next year, as the sectors balance out a portfolio with both growth and value-focused stocks, at a time when markets expect the Bank of Japan to end its ultra-loose monetary policy.

The BOJ’s wrapped up its final meeting of 2023 leaving interest rates within the negative territory at -0.1%, while sticking to its yield curve control policy that keeps the upper limit for 10-year Japanese government bond yield at 1% as a reference.

A slowing economy and cooling inflation, however, could pose as a potential challenge for the BOJ when it comes to unwinding its ultra-easy stance. Investors will also keenly await the annual spring wage negotiations next year to confirm a trend of any meaningful increases to wages.