Spotlight on Asia 2020 - story in charts - HSBC Global Asset Management ...
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Spotlight on Asia 2020 – story in charts December 2019 The information contained in this publication is not intended as investment advice or recommendation. Non contractual document. This commentary provides a high level overview of the recent economic environment, and is for information purposes only. It is a marketing communication and does not constitute investment advice or a recommendation to any reader of this content to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. The performance figures displayed in the document relate to the past and past performance should not be seen as an indication of future returns. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecast, projection or target.
Spotlight on Asia 2020 – story in charts
Key takeaways:
After several quarters of fretting about slowing growth and weak demand, there are
signs of stabilisation and/or pick up in key cyclical sectors, which bodes well for
corporate earnings in the region after a year of staying more or less flat
In the face of an external drag brought about by a global slowdown, Asian nations still
have room to support their economies via policy easing
In the context of investing in Asia, we believe the risk posed by the ongoing US-China
trade tension has been overstated
As a result of the US-China trade tension, select Asian countries are already beginning
to see benefits accrued to their economies, in the form of increases in foreign direct
investment (FDI)
We outline the macro narratives that form the backdrop for investing in Asia in 2020 in the
following five charts:
On the road to a cyclical recovery
Bottoming out/pick-up in tech sector(1) On the whole, the monetary and
% yoy; 3mma
80
fiscal policy measures rolled out by
Asian economies to counter
60 external and domestic pressures
have seen varying degrees of
40 success in countering the
slowdown. Encouragingly, we are
20 seeing signs of bottoming out in
certain key cyclical sectors in Asia,
0 including the tech/semiconductor
industry. We see a better outlook
-20 for Asia’s semiconductor sector in
2020 amidst improved demand-
-40 supply dynamics. Also, driven by
2014 2015 2016 2017 2018 2019
demand for 5G, AI and cloud data
KR semiconductor exports centres, economies in Asia that are
TW electronics exports integral to the tech supply chain
Semiconductor equipment billings (North America) shall benefit.
CN high-tech exports
Source:
(1) Bloomberg, CEIC, HSBC Global Asset Management, data as of September 2019
Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is
indicative only and not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecast, projection or target. For
illustrative purpose only.
1Spotlight on Asia 2020 – story in charts
Policy support
Room for further easing but focus on improving transmission
% Cumulative policy rate changes(2)
3.0 (2015-October 2019) To combat slowing growth in 2019,
central banks across the world
2.0 have adopted expansionary
monetary policies. Asian central
1.0 banks have followed suit and cut
their policy rates throughout the
0.0
year. However it is worth noting
-1.0 that for some key Asian
economies, recent rate cuts have
-2.0 merely reversed the rate hikes
undertaken in 2018. Looking
-3.0 ahead, we see room for further
monetary expansion, if necessary,
-4.0
CN IN ID KR MY PH TW TH AU NZ US
but for now the focus is on
(1Y improving the transmission of
LPR) policy easing to the real economy.
2015 2016 2017 2018 2019 Cumulative
Inflation risk remains manageable for now
% yoy; 3mma Core CPI inflation(3)
Core inflation in Asian countries
10
have either been steady or
9 trending lower amid pressure from
8 tepid demand, even in the face of
recent headline volatility due to
7
food and energy prices. Inflation is
6 unlikely to be a constraint on policy
5 easing for Asian central banks, in
4
our view. However, the dovish
market perception of this risk flags
3 the possibility that inflation could
2 surprise on the upside amidst
1 wage growth pressures and more
active fiscal policy.
0
2013 2014 2015 2016 2017 2018 2019
CN IN ID Avg of PH, MY, TH Avg of KR, SG, TW
Source:
(2) CEIC, Bloomberg, HSBC Global Asset Management, data as of October 2019
(3) Bloomberg, HSBC Global Asset Management, data as of October 2019
Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is
indicative only and not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecast, projection or target. For
illustrative purpose only.
2Spotlight on Asia 2020 – story in charts
US-China relations
Too linked to cut loose
US-China FDI stock
The uncertainty over US-China
and sales by US foreign affiliates in China(4) relations are clearly an overhanging
USD bn USD bn risk factor for the region’s economy.
120 600
But given the interconnectedness of
100 500
the two economies through trade,
investments, financial flows and
80 400 other links, we believe both sides
would have strong incentive to
60 300 resolve the trade dispute. While it is
difficult to say with any certainty
40 200 when the two sides are likely to
reach a resolution and what the
20 100
terms of such an agreement might
0 0
be, the fact that both sides seem
supportive of a “phase one” trade
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2011
2012
2013
2014
2015
2016
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deal with continuing trade
US FDI in China (LHS) negotiations is testament to their
China FDI in the US (UBO) (LHS) willingness to seek common ground
US total sales in China (all affiliates) (RHS) and resolve their differences.
Supply chain realignments
Lose some, win some
FDI approval/application value(5) While the negative repercussions
USD bn % yoy
20 250
from US-China trade tensions
remain a cause for concern, there
18 217.8
is growing focus on the potential
16 200
gains to lower-cost Asian
14 economies (particularly ASEAN
12 150 and India) from the resulting
10 75.0 global supply-chain realignments
47.6 over the medium-to-long term.
8 100
This could be illustrated by the
6
recent increase in foreign direct
4 50 investment (FDI) approvals/
2 applications in manufacturing to
0 0 southeast Asian nations
Malaysia* Thailand** Vietnam*** (Vietnam, Thailand and Malaysia,
4Q17-2Q18 (LHS) 4Q18-2Q19 (LHS) % growth (period over in particular).
Note: * FDI approval value for Malaysia; ** FDI application value for Thailand; *** Registered FDI capital (manufacturing) for Vietnam
Source:
(4) US Bureau of Economic Analysis, Bloomberg, CEIC, HSBC Global Asset Management, data as of October 2019
(5) Bloomberg, CEIC, HSBC Global Asset Management, data as of September 2019.
Any views expressed were held at the time of preparation and are subject to change without notice. While any forecast, projection or target where provided is
indicative only and not guaranteed in any way. HSBC Global Asset Management accepts no liability for any failure to meet such forecast, projection or target. For
illustrative purpose only.
3Important information
The value of investments and the income from them can go down as well as up and investors may not get back the amount
originally invested. Past performance contained in this document is not a reliable indicator of future performance whilst any
forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where
overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up.
Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some
established markets. Economies in Emerging Markets generally are heavily dependent upon international trade and, accordingly,
have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies
also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Mutual
fund investments are subject to market risks, read all scheme related documents carefully.
The contents of this document may not be reproduced or further distributed to any person or entity, whether in whole or in part, for
any purpose. All non-authorised reproduction or use of this document will be the responsibility of the user and may lead to legal
proceedings. The material contained in this document is for general information purposes only and does not constitute advice or a
recommendation to buy or sell investments. Some of the statements contained in this document may be considered forward
looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not
guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those
described in such forward-looking statements as a result of various factors. We do not undertake any obligation to update the
forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the
forward-looking statements. This document has no contractual value and is not by any means intended as a solicitation, nor a
recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The
views and opinions expressed herein are those of HSBC Global Asset Management Global Investment Strategy Unit at the time of
preparation, and are subject to change at any time. These views may not necessarily indicate current portfolios' composition.
Individual portfolios managed by HSBC Global Asset Management primarily reflect individual clients' objectives, risk preferences,
time horizon, and market liquidity.
We accept no responsibility for the accuracy and/or completeness of any third party information obtained from sources we believe
to be reliable but which have not been independently verified.
Copyright © HSBC Global Asset Management (Hong Kong) Limited 2019. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of HSBC Global Asset Management (Hong Kong) Limited.
This document has not been reviewed by the Securities and Futures Commission.
HSBC Global Asset Management is the brand name for the asset management business of HSBC Group. The above
communication is distributed in Hong Kong by HSBC Global Asset Management (Hong Kong) Limited.
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