2023 was a turbulent year for investors with wider economic factors influencing markets. From soaring inflation and higher interest rates to geopolitical tensions in Europe and the Middle East.
Looking to the rest of 2024, there’s optimism on the horizon. Inflationary pressures look like they’re easing, interest rate cuts seem likely, and valuations look mostly attractive for Asia and emerging markets. This could be a better backdrop for investors in the months to come.
This article isn’t personal advice. All investments can fall and rise in value, which means you could get back less than you invest. If you're not sure if an investment’s right for you, ask for financial advice.
Going to the polls
2024 is an important year for democracy. More than two billion people are going to the polls around the world. And this many elections on this scale is pretty unique. Elections play a crucial role in shaping economic policies and can impact market confidence.
In January, Taiwan saw Lai Ching-te of the Democratic Progressive Party (DPP) elected president for a third term. Tensions with China are ongoing, so Lai Ching-te will be kept busy trying to keep the peace in the Indo-Pacific region.
Indonesia and Pakistan are going to the polls later this month. And between April and May, India’s Prime Minister Narendra Modi is looking for re-election, followed by Mexico and South Africa in June.
But the most impactful election for Asian and emerging economies is coming in November – the United States.
A lot of nations, especially smaller ones, tie their currencies – known as ‘pegging their currency’ – to the US dollar. So, they’re more prone to US monetary policy shifts.
The outcome, no matter who wins, will significantly shape foreign policy, particularly relations with China.
The Year of the Dragon
Last year was the Year of the Rabbit, usually linked to gentleness and serenity, but for Chinese investors, 2023 was far from peaceful. The question, whether the economy would meet its 5% target – the lowest in decades – sparked debate among analysts and economists throughout the year.
The economy did crawl over the line to record full-year gross domestic product (GDP) growth of 5.2%. But meeting this target doesn’t hide the ongoing challenges facing policymakers. Deflation, debt, record youth unemployment and a declining population are just a few.
As we approach the Year of the Dragon, the world’s second biggest economy looks like it’s on a tough path. Even with recent setbacks, the symbolism of the Dragon – success, strength, and power – looks like the Chinese markets we’ve seen over its multi-decade climb. But remember, past performance isn’t a guide to the future.
While economic growth has slowed, it’s still expected to outpace the developed world. In 2024, the IMF is forecasting 4.2% GDP growth versus 1.4% for advanced economies and 2.9% globally. However, achieving the impressive double-digit growth rates witnessed in the past will require significant adjustments and strategic initiatives.
Monetary policymakers have taken broad, gradual measures to support the economy, but the market is calling for more significant action to help restore investor confidence.
Interestingly, the Chinese regulator recently stepped in to limit short selling. This strategy can help investors profit from a falling stock market and banning it, at least temporarily, has happened before.
How have stock markets performed?
The past 12 months (to end of January 2024) presented challenges. The MSCI AC Asia Pacific ex Japan and MSCI Emerging Markets indices fell 8.75%* and 5.79% respectively. This was a stark contrast to the broader global stock market with the MSCI AC World index rising by 11.43% over the same time.
Stylistically, emerging and Asian ‘value’ stocks generally outperformed their ‘growth’ counterparts. Growth companies are expected to deliver above-average growth, measured by factors like earnings or revenues.
In contrast, value companies are cheaper or at a discount to what the true share price should be, maybe because they’ve been going through a tough time. Smaller companies also performed better than larger ones.
China, which makes up a big part of both the Asian and emerging markets, weighed down overall performance. The MSCI China index fell 31.22% over the past 12 months, with negative investor sentiment casting a shadow over the world's second-largest economy.
India's stock market grew 23.76%. India is one of the fastest-growing economies globally, boasting 7.6% year-on-year GDP growth to the end of September 2023.
Emerging European markets also looked resilient, with the MSCI Hungary Index surging by 38.94%, while the MSCI Greece and MSCI Poland indices went up 36.42% and 31.38% respectively.
In terms of valuations, emerging and Asian markets overall look attractively priced.
Uncertainty in China means share price valuations are below their 30-year average. Other places in Asia, like Indonesia and the Philippines offer appealing valuations compared to historical levels. Latin American markets, particularly Chile, Colombia, Mexico, and Brazil, also look like they’re good value.
Not everywhere is undervalued though. Following the recent surge in market enthusiasm in India, companies here look relatively expensive. That said, there’s usually opportunities to find value.
Annual percentage growth
Jan 19 – Jan 20 | Jan 20 – Jan 21 | Jan 21 – Jan 22 | Jan 22 – Jan 23 | Jan 23 – Jan 24 | |
|---|---|---|---|---|---|
MSCI AC Asia Pacific ex Japan | 7.02% | 26.68% | -7.60% | 2.11% | -8.75% |
MSCI AC World | 16.43% | 12.88% | 16.38% | 0.77% | 11.43% |
MSCI China | 5.78% | 40.38% | -27.50% | -1.84% | -31.22% |
MSCI Emerging Markets | 4.00% | 23.19% | -4.76% | -3.80% | -5.79% |
MSCI Greece | 29.05% | -32.76% | 29.97% | 15.26% | 36.42% |
MSCI Hungary | 0.77% | -0.96% | 20.19% | -25.83% | 38.94% |
MSCI India TR | 8.59% | 9.54% | 30.91% | -0.82% | 23.76% |
MSCI Poland | -15.55% | -10.97% | 9.77% | -12.25% | 31.38% |
Jupiter India was the best performing Asian and emerging markets Wealth Shortlist fund over the last 12 months (to end of January 2024). Over this period the fund returned 48.49% versus 22.36% and 23.29% for the IA India/Indian Subcontinent sector average and MSCI India, respectively.
While recent performance has been strong, investors shouldn’t expect further periods of such strong performance. Investors should also be aware the fund invests a lot more than the benchmark in higher-risk smaller companies.
Veteran fund manager Avinash Vazirani and assistant manager Colin Croft use a ‘GARP’ (Growth at a Reasonable Price) investment approach to help narrow down a list of over 6,000 companies. To meet their criteria, each business should generate good cash flow, be financially strong and valued at a share price that doesn’t reflect their earnings potential.
You can read more in our latest fund update.
If you’re looking to invest in emerging markets and are happy with the higher risk associated with it, we think a broad global emerging markets or Asian fund is probably a good starting point. Other funds could be added to a portfolio for more exposure to a particular theme, area, or country. When investing it’s essential that investors take a long-term view of at least five years.
How have Wealth Shortlist funds performed?
Asian and emerging markets Wealth Shortlist funds have delivered mixed performance over the year. We typically expect this. A range of managers with different strengths, styles and areas of focus will perform differently in different economic conditions.
Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, please see the links to their factsheets and key investor information below.
Jupiter India
Jupiter India was the best performing Asian and emerging markets Wealth Shortlist fund over the last 12 months (to end of January 2024). Over this period the fund returned 48.49% versus 22.36% and 23.29% for the IA India/Indian Subcontinent sector average and MSCI India, respectively.
While recent performance has been strong, investors shouldn’t expect further periods of such strong performance. Investors should also be aware the fund invests a lot more than the benchmark in higher-risk smaller companies.
Veteran fund manager Avinash Vazirani and assistant manager Colin Croft use a ‘GARP’ (Growth at a Reasonable Price) investment approach to help narrow down a list of over 6,000 companies. To meet their criteria, each business should generate good cash flow, be financially strong and valued at a share price that doesn’t reflect their earnings potential.
You can read more in our latest fund update.
FSSA Greater China Growth
FSSA Greater China Growth was the weakest performer of our Asian and emerging market Wealth Shortlist funds. Over the last 12 months, the fund fell -25.90% versus -33.26% for the IA China/Greater China sector and -20.01% for the MSCI Golden Dragon.
With this more conservative approach, we typically expect the fund to hold up better when markets fall. But the manager’s selection was weaker over this period.
We still have conviction in Martin Lau’s ability to perform over the long term. Lau is a highly experienced manager and supported by a well-resourced team. Over the long term, he’s added value through stock selection.
He and his team look for high-quality companies that mainly operate within China, Hong Kong, and Taiwan. They prefer companies with a competitive advantage that others struggle replicating, like a well-known brand or the ability to raise prices for their products without affecting customer demand.
Companies should also have the potential to grow earnings sustainably over the long term and be run by reputable management teams that avoid taking unnecessary risks for short-term gains.
Annual percentage growth
Jan 19 – Jan 20 | Jan 20 – Jan 21 | Jan 21 – Jan 22 | Jan 22 – Jan 23 | Jan 23 – Jan 24 | |
|---|---|---|---|---|---|
FSSA Greater China Growth | 14.29% | 42.11% | -3.87% | -1.97% | -25.90% |
IA China/Greater China | 10.87% | 45.47% | -20.50% | -3.19% | -33.26% |
IA India/Indian Subcontinent | 9.50% | 6.21% | 28.23% | -2.61% | 22.36% |
Jupiter India | 3.08% | -1.41% | 38.09% | 2.36% | 48.49% |
MSCI Golden Dragon | 8.60% | 37.61% | -14.98% | -3.93% | -20.01% |
MSCI India | 8.60% | 9.20% | 30.47% | -1.34% | 23.29% |