Yoojeong Oh, investment director at abrdn, an investment manager, shares her insights on the outlook for Asian equities in 2024 and outlines her top stock picks.

Although US tech stocks suffered a major setback in August,
Yoojeong Oh, investment director of the abrdn Asian Income Fund (AAIF),
is optimistic about the outlook for Asian equities in 2024,
particularly markets in Taiwan, Singapore and Australia, driven
by digitalisation, high tech firms and a strong focus on
artificial intelligence.

Oh highlighted how Asian markets were volatile in July due to
disappointing economic data, a global tech outage and heightened
geopolitical tensions after the US floated tougher trade
restrictions on China. Stocks in Taiwan weakened as a typhoon led
to the market being closed for several days and the technology
sector was hit by US-China trade issues, along with disappointing
earnings from heavyweight US tech giants Tesla and Alphabet, the
parent company of Google. Stocks in China also dropped after data
showed that the economy grew at a slower pace than expected.

By contrast, Oh emphasised how the Singapore equity market
outperformed the region over July against a stabilising domestic
backdrop and data showing that the economy grew modestly in the
second quarter, while headline inflation inched down. Indian
stocks continued to rise as the new coalition government led by
Prime Minister Narendra Modi announced its first budget which
included measures to improve consumption, rural demand and
employment.

In early August, there was also a sharp sell-off across Asian
markets due to concerns that the US Federal Reserve (Fed) was
behind the curve in cutting interest rates after higher US
jobless data triggered recession fears. As with the US, the
technology sector has borne the brunt of the sell-off on
nervousness about elevated valuations, especially in AI-related
stocks, and the impact of the US presidential election on
geopolitical tensions. Investors are pencilling in two 0.25
per cent cuts at the Fed’s meetings this year.

Nevertheless, Oh is optimistic about the outlook for Asian tech
stocks and AI, saying there will be strong memory chip demand
over the next two to three years.

abrdn Asian Income Fund (AAIF)

Oh manages the AAIF, which has outperformed the index, and aims
to grow its dividends over time. Oh highlighted how the fund
proved to be  defensive in August, despite the US tech
sell-off. In 2023, the dividend per ordinary share increased by
17.5 per cent, from 10 pence to 11.75p, providing a dividend
yield of 5.6 per cent at the end of the year. The net value added
(NAV) total return of 2.5 per cent for the year was ahead of the
index, which increased by 1.6 per cent on a total return basis.

Oh believes that the outlook is bright due to the broad-based
growth across Asia and the strength of the companies in the
portfolio. The turnaround in the IT and semiconductor cycle,
green transition and nearshoring as a result of geopolitics also
benefits companies and countries in Asia.

Oh is underweight in China and India due to its lesser focus on
dividends, preferring markets in Taiwan, Singapore and Australia.
She is also overweight in Indonesia and Thailand. Top 10
holdings include Taiwan Semiconductor Manufacturing Company
(TSMC), the fund’s largest holding at 11.8 per cent. She also
invests in Taiwan’s Accton Technology and mobile phone operator
Taiwan Mobile. “Twenty per cent of the fund is also invested in
small caps, a lot in Taiwan, including Sunonwealth Electric
Machine,” she told this news service in an interview. The firm
designs and supplies a variety of thermal fans, as well as
cooling solutions.

Another top 10 holding is Korea’s Samsung Electronics, the
largest global producer of DRAM chips which has benefited from
the price increase of DRAM and NAND flash memory chips, driven by
demand for generative AI.

Other top holdings include Singapore’s United Overseas Bank and
Oversea-Chinese Bank. Oh highlighted how Singapore is a small
country with a good growth story. Holdings also include India’s
Power Grid, an electric power transmission company, which aims to
reach net zero by 2047.

Oh also emphasised the investment opportunities in Australia’s
mining companies and banks, saying it is a high-yielding market.
She invests in Australia’s BHP, a mining company, as well as
Commonwealth Bank of Australia (CBA). Chinese multinational tech
firm Tencent is also a top 10 holding.   

Other wealth managers

Other wealth managers are also positive about Asian equities in
2024. Japan’s Nomura Holdings believes that the time has come to
add to ASEAN stocks. Nomura is going to upgrade two of its
preferred markets in ASEAN, namely Malaysia and Indonesia, to
overweight from neutral. Nomura believes that there are
local supportive factors too. It funds these by downgrading MSCI
China stocks to a neutral, from its long-held tactical overweight
which has been a disappointment for Nomura. Cheuk Wan Fan,
chief investment officer, Asia at HSBC Global Private
Banking, holds an overweight view on equities in Japan,
India, and South Korea, where she sees the best opportunities
for tapping into Asia’s structural growth themes. Swiss
private bank Julius Baaer is also optimistic about the
outlook for India, Taiwan and South Korea, saying that they
expect funds to keep flowing into these countries. See more
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