Wealth Outlook 2024 - Slow then grow

107 Wealth Outlook 2024 | Regional outlook Asia: faster growth for 2024 as headwinds recede Considerations: • The easing phase in China’s policy cycle for improving risk/reward in Chinese industrials, consumer discretionary and government-priority technology segments may pose opportunities. • We are maintaining our overweight to Indian equities despite still-high valuations, with a focus on materials, industrials and staples. • Investors should consider Asian equity exposure that are supported by a backdrop of broader growth, lower inflation and interest rates, as well as a softer US Dollar. Despite headwinds fromUS Federal Reserve (Fed) tightening and China’s sputtering economy, Asian economies and markets collectively held up relatively well in 2023. The foundering of China’s property sector and the country’s shorter-than-expected bounce from its long-delayed COVID reopening created a drag on the entire region as Chinese consumers and businesses were reluctant to spend at home or abroad. High inflation in some Asian economies shrank trade volume and restrained real consumption growth. But others benefited from high commodity prices. And balance of payments stayed surprisingly even-keeled despite the surge in the US dollar (USD) and US interest rates (reflecting the region’s relatively healthy external financing conditions). Geopolitical tensions were also largely a wash: some markets like Japan and India benefited from supply chain diversification while China, Korea and Taiwan were negatively impacted. These colliding forces resulted in the wide divergence of performance experienced by investors across the region. Hong Kong led regional stocks on the downside, shedding 15% through November 24, 2023 (worse even than the 8% slide in mainland Chinese shares). In contrast, Taiwan surprised with a 21% total return, rivaling even the US, as the still- Taiwan-centric global semiconductor industry roared back to life. Of special note: Japan had the region’s second-highest equity returns, up 15%, as its reflation and policy reforms lured back long-absent global investors. India’s returns approached 10%, after consistent outperformance in 2021-22 ( FIGURE 1 ).