Bloomberg News reports that turnaround hopes were afloat for Asian equities, and this comes after a wipeout valued at $5 trillion occurred. Investors have been betting on a few of the largest bugbears of the past year, and they apprehend that same are likely to emerge as tailwinds for 2023.
What are the Key Drivers for a Snapback of the MSCI Asia Pacific Index?
Two factors are being held responsible for an MSCI Asia Pacific Index snapback since 2008 was recorded as the worst year. These include a slowdown in the tightening cycle of the Federal Reserve. The other aspect is a full reopening of China. There have been relief signs which have emerged with Beijing abandoning its Zero Covid policy. The dollar has edged down from the peak; however, catalysts will be required by the investors that have been bruised in the process.
It is anticipated that Asia is slated to perform better than the United States. For the tech-heavy markets of Taiwan and South Korea, a bottoming out of the chip downturn will be monitored closely. On the other hand, ripple effects will be observed across the region due to the hawkish approach of the Bank of Japan. Aside from the above, consolidating few factors that will shape the Asian equity market in 2023 are below.
The Following Five Factors will Decide the Fate of the Asian Equity Markets in 2023:
China Revival
If there is a rebound in the economy of China, it will rev up the profits in this region. But how the Covid outbreak takes shape will also contribute to the economy’s behavior, and this is because there are concerns that the global supply chain might be impacted.
Descent of the Dollar
The 19% drop in the MSCI Asia Pacific Index in 2022 wiped out $5 trillion of dollars in the market value of the members’ companies. However, the greenback, supercharged in 2022, weighed in immensely on Asian stocks.
Chipper Chipmakers
Taiwan and South Korea are two regions home to the world’s largest chipmakers, including the giants like Samsung Electronics Co and Taiwan Semiconductor Manufacturing Co. Both faced a difficult year in 2022 as demands plummeted and higher borrowing costs bombarded tech stocks.
Hawkish Bank of Japan
As mentioned in the above paragraphs, Bloomberg News reports that the surprise move of BOJ for double capping on bond yields has given rise to expectations that more hawkishness is impending. This aspect is likely to foster the yen and will invariably weigh on the automakers and tech makers of the nation, as well as the exporters.
Tensions Prevailing Geopolitically
While a wide array of aspects signal a positive 2023, investors are treading carefully and taking on calculated risks since the chances of geopolitical tensions flaring up are always ripe.
