As markets recover, here’s how to make the most of your money in Asia
U.S. stocks have recovered robustly following March’s virus-induced sell-off, prompting many to return to the markets to make gains — and recoup losses.
The S&P 500 erased its 2020 losses and the Nasdaq Composite reached a new record Monday, even as officials declared that the U.S. entered a recession in February.
As markets recover:
That might suggest the region’s return as an investing hot spot. But, as the dollar continues to tumble amid ongoing central bank stimulus, investors may be wise to look to other markets for wealth-building opportunities.
Asia could offer one highlight, according to advisors CNBC Make It spoke to.
Opportunities in Asia
UBS Global Wealth Management has said Asia (excluding Japan) is the “only region” it expects to produce positive equities earnings growth this year.
The call reinforces positivity among wealthy Asian investors, who in April said they were largely optimistic (51%) on the six-month outlook for stocks in their region, compared with 46% in Europe and just 35% in the U.S. Major Asia-Pacific markets were up as much as 49% from their March lows last week.
That presents an opportunity for investment in the region — particularly for Asian investors who would otherwise be hit by foreign exchange losses when investing in U.S. dollar-denominated stocks, according to Freddy Lim, co-founder and chief investment officer of StashAway.
“There is a good chance that Asian currencies are going to outperform the U.S. dollar over the next 18-24 months,” said Lim of the Singapore-based digital wealth manager. “This also means that Asian-based assets could start looking interesting in local currency terms.”
Top markets for investing
As markets recover: Looking at Asia’s major markets, Singapore’s Straits Times Index appears attractive, offering access to “steady, high quality names with a long track record of navigating past epidemics,” said Lim.
Other industrialized Asian markets, such as South Korea, Hong Kong, Taiwan, as well as China, also look to be relative “winners” compared with their less developed regional counterparts, according to HSBC Singapore’s head of wealth & international, Ian Yim.
“In addition to being attractively valued, they have lower exposure to commodities and oil, and have proven themselves to be better equipped to cope with the Covid-19 crisis,” said Yim, highlighting the various factors at play in the market.
More specifically, industries with strong fundamentals that have been accelerated by the virus, such as e-commerce, the internet, and China’s new economy, are likely to do well, agreed Yim and Lim.
“E-commerce-enabled companies have proven to have robust business models and can potentially reap the benefits of changing consumption behavior in future,” said Yim.
Bonds and real estate
As markets recover: Outside of the stock market, other investments in Asia show promise, noted Samuel Rhee, chairman and chief investment officer of Singapore-based digital advisory Endowus.
Asian fixed-income bonds, in particular, have fared well under governments fiscal response to the virus, and provide some all-important investment diversification, he said.
“For bonds, regionally, we see value in Asia, where yields have increased,” HSBC’s Yim agreed.
Real estate, or real estate investment trusts (REITs), on the other hand, could present some “vulnerabilities,” given the virus’ impact on the sector, said Rhee.
As markets recover: Before taking advantage of any investment opportunity, it’s important to come up with a strategy. Outlining your financial goals and how much you can afford to invest is a great place to start.
StashAway’s Lim recommended systematically investing a fixed sum each month. According to StashAway’s Insights 2020, “systematic investors,” who invest continuously through a downturn, perform better than those who withdraw during a correction.
As markets recover: There are plenty of digital wealth managers now available to help you do that; automatically investing in passively-managed index funds or exchange traded funds (ETFs) that track specific regions or sectors. Not only does that take the hassle out of monitoring the markets too closely, it also allows you stay invested for the long term, said Endowus’ Rhee.
“Time in the market is more important than trying to time the market,” said Rhee. ”(That) has been proven to be a futile effort as the recent rapid fall and the equally rapid rebound has proven again.”