Asian markets ‘offer good earnings growth’ going into 2020

Chinese_indicesAsian markets offer good earnings growth at lower valuations relative to many developed markets ­­­as investors weigh up where capital will move and how a change in market leadership will affect their portfolios heading into 2020, according to Fidelity International. The more modest valuations put investors in a good position for reasonable returns from Asia next year as developed markets outside the US struggle to boost growth. The earnings outlook for Asia Pacific ex-Japan in 2020 is 9.3% compared to 8% globally, 6% in Europe and 6.2% in China. The region is exceeded only by emerging markets (9.9%) and the US (9.5%). “In China in particular, there could be weaker returns from the popular technology and consumer names and stronger performance from other sectors,” said Paras Anand, head of asset management for Asia Pacific at Fidelity International in the Asia Market Outlook 2020. Corporate governance in China is also evolving as the country opens its capital markets to foreign investors. While the domestic consumption story continues, demand for Chinese brands – particularly in food and luxury goods – means that local brands are growing at a faster rate than international names and Chinese luxury brands could even breakthrough in Western markets, “reflecting a shift in global influence”. On the wider region, Anand added: “Other themes are emerging. After being re-elected, India’s Prime Minister Modi appears to be driving a concerted effort to continue reforming the economy, including the recent move to cut corporation tax rates. These measures demonstrate his desire to create a more business-friendly environment.” ©2019 funds global asia

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