Asia’s benchmark stock index was on track to enter a bull market, as China’s reopening and a weakening dollar lure investors back to the region.
The MSCI Asia Pacific Index climbed as much as 1.9% on Monday, taking its advance from an Oct 24 low to more than 20%. Gauges in Hong Kong, Taiwan and South Korea led gains in the session, while Japan was closed for a holiday.
Strategists have predicted a better year for Asian equities after a dismal 2022, especially as stocks in China, which carry the second-highest weighting in the regional gauge after Japan, turned a corner in November following the nation’s shift away from stringent virus curbs. The bull market milestone comes after the MSCI Asia gauge tumbled nearly 40% from a peak in early 2021.
The Asian benchmark is up 3.7% so far in 2023, beating the S&P 500 Index by about two percentage points. That’s after they both slumped about 19% last year, their worst performance since 2008.
“The rally has been fast and furious, so it is only natural to expect some profit-taking,” said Charu Chanana, senior strategist at Saxo Capital Markets Pte. “There are also some risks to keep a tap on, such as BOJ’s hawkish shift and company earnings. But that being said, there is still room for Asian markets to outperform global peers in 2023.”
Stocks in China have made a strong start to 2023 after being caught in a downward spiral for much of last year amid concerns over the economic toll from virus restrictions. Easing regulatory risks and more support measures to revive the troubled property sector have lent an additional boost to the market, helping the Asia rally.
A gauge of Chinese stocks listed in Hong Kong climbed 2% Monday, taking its gain for the year to nearly 9%. Alibaba Group Holding Ltd. led a rally in tech shares as comments by Guo Shuqing, party secretary of the People’s Bank of China, that a clampdown on the sector is coming to an end likely gave traders further conviction.
Goldman Sachs Group Inc. sees Chinese stocks extending their rally on policy pivots in areas including housing and internet regulation. Meanwhile, tech stocks in Asia are also recovering amid indications that the Federal Reserve will likely slow its pace of interest-rate increases.
“The US dollar is weakening, thus pushing liquidity back to Asia Pacific markets,” said Banny Lam, managing director at CEB International Investment Corp. “I believe it is a more sustainable rally as 2022’s dip and improving regional economic outlook provide room for upside.”
Markets at a glance
- Thailand’s SET up 0.7%
- MSCI Asia Pacific Index up 1.7%
- Hong Kong’s Hang Seng Index up 1.9%; Hang Seng China Enterprises up 2%; Shanghai Composite up 0.6%; CSI 300 up 0.8%
- Taiwan’s Taiex index up 2.6%
- South Korea’s Kospi index up 2.6%; Kospi 200 up 2.7%
- Australia’s S&P/ASX 200 up 0.6%; New Zealand’s S&P/NZX 50 up 0.2%
- India’s S&P BSE Sensex Index up 1.4%; NSE Nifty 50 up 1.3%
- Singapore’s Straits Times Index up 0.8%; Malaysia’s KLCI up 0.9%; Philippine Stock Exchange Index up 1.8%; Jakarta Composite up 0.1%; Vietnam’s VN Index up 0.3%