Sue Trinh, Manulife Investment Management
Rising inflation, geopolitical tensions, and spikes in covid-19 cases will cause uncertainty, but they should not stop investors from finding opportunities in emerging markets, especially in Asia, according to Manulife IM.
“Emerging Asia’s equities and fixed income will be supported by accommodative monetary policy stances and are in a better position to withstand the US Federal Reserve’s taper risks, thanks to stronger external positions, lower reliance on external funding, and better-balanced positioning,” said Sue Trinh, head of macro strategy, Asia, Manulife IM.
Strong trade surpluses and the reopening and recovery after the pandemic mean that Taiwan, Japan and selected Asean countries such as Vietnam, Indonesia, Thailand, Singapore and Malaysia are well-positioned, she added.
“The near-term outlook for Asean equities is expected to improve as economies reopen, with most countries in the bloc gradually relaxing movement and travel restrictions,” said Kenglin Tan, senior portfolio manager, equities at Maunlife IM.
“Our positive view towards the sub region is further reinforced by the higher real yields in major economies, namely Indonesia and India, which are attracting capital flows.”
In addition, southeast Asia could be a “strategic beneficiary” from the potential Sino-US tensions over the medium term to attract more foreign investments in sectors such as Indonesia battery suppliers, Thailand auto companies and Malaysia IT supply chain firms, she said.
Fixed income
Within the fixed income space, Manulife believes sustainable Asian credits are likely to enjoy a better year given rising concerns over ESG issues.
“We’re beginning to see growth of another kind – diversification in issuers in terms of sectors and geography in both the credit and sovereign space,” said Murray Collis, deputy chief investment officer, fixed income, Asia ex-Japan, Manulife IM.
“We expect the issuance of ESG bonds in Asia to continue to grow in 2022, as focus shifts from declaration of intent to actual implementation post COP26 summit.”
In particular, he is constructive on the Indian renewable energy sector, as the Indian government recently declared its pledge to become net-zero by 2070.
Manulife IM’s views are echoed by Angus Hui, head of Asia and emerging market credit, Schroders.
“We see opportunities in renewable energy in India, whereas in Indonesia, new issue valuations are less compelling. Some sectors in China face risks from moves to reduce borrowing and we are particularly selective toward high yield industrials,” he said.
