- Growth in developing Asia remained upbeat in the first half of 2023 despite a weaker global outlook. According to the Asian Development Bank (ADB), the region benefited from healthy domestic demand, the reopening of China, rebounding tourism, and stable financial conditions.
- The FTSE All World Emerging APAC Index generated 6.5% total returns in the 8M2023, clawing back more than a third of its 17% declines last year. Top performing markets (as indicated by respective country indices) include Vietnam (+21.8%), Taiwan (+18.1%), India (+8.8%) and Indonesia (+8.2%).
- Despite current investors’ concerns, China remains as a key driver for the region. China’s 5.5% GDP growth in 1H2023 has outpaced developed markets. While ADB adjusted China’s overall 2023 growth to 4.9% (from 5.0%), it maintained its growth forecast for 2024 at 4.5%.
The Asian Development Bank (ADB) published the latest September 2023 Regional Outlook last week, citing that growth in developing Asia remained upbeat in 1H2023 despite a weaker global outlook. It noted that although soft external demand weighed on export-oriented economies, the region benefited from healthy domestic demand, the reopening of China, rebounding tourism, and stable financial conditions. This was also supported by easing inflation in the region, and expectations of less aggressive monetary policy tightening by the US Federal Reserve.
ADB noted that equity markets have strengthened in developing Asia, with rallies in most markets in the region. Net portfolio inflows have also risen on improved market sentiment. In the first 8 months of 2023, net portfolio inflows totaled $55.9 billion.
The FTSE All World Emerging APAC Index generated 6.5% total returns in the 8M2023, clawing back more than a third of its 17% declines last year. This Index covers eight markets across developing Asia, including China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan and Thailand. While its performance lagged the FTSE All World Developed APAC Index’s total return of 10% during the 8M2023 period, VN Index emerged as an outperformer against both regional indices.
The four emerging market indices that outperformed the FTSE All World Emerging APAC Index in 8M2023 were VN Index (+21.8% in total return terms), Taiex Index (+18.1%), Nifty 50 Index (+8.8%) and JCI Index (+8.2%).
Concerns around China’s growth and economic data dampened sentiments in September, with the FTSE All World Emerging APAC Index declining 0.6% (in total returns terms) in the month-to-date till 27 Sep. Outperformers for the month-to-date include PSE Index and Nifty 50 Index, which gained 4.2% and 3.3% respectively.
SGX lists several ETFs that provide investors access to the developing Asia markets, including country exposures into Vietnam, India and Indonesia. These ETFs are listed in the table below.
The suite includes the CGS Fullgoal Vietnam 30 Sector Cap ETF (VNM) listed on 25 August 2023. It aims to track the performance of the iEdge Vietnam 30 Sector Cap USD Index (NTR) and invest into the 30 largest and most liquid companies by market capitalisation, which are listed on Ho Chi Minh Stock Exchange.
While there are investor concerns around China’s prospects, the country remains as a key driver for the region’s growth. Overall, ADB’s forecast for growth in developing Asia for 2023 was revised slightly down to 4.7% from 4.8% previously but kept at 4.8% for 2024.
ADB cited that healthy domestic demand continued to drive developing Asia’s growth, especially with China’s reopening. However, China’s weak property sector will be a risk to the recovery trajectory and could hold back growth in the region.
Despite the current negative sentiments, China’s 5.5% GDP growth in 1H2023 has outpaced developed markets. While ADB adjusted China’s overall 2023 growth to 4.9% (from 5.0%), it maintained its growth forecast for 2024 at 4.5%.
For investors looking for exposure to the Chinese market, SGX lists seven ETFs on the Chinese equity market and two ETFs on the Chinese bond market. This includes three A-Shares focused ETFs – CSOP CSI STAR and CHINEXT 50 Index ETF (SCY), UOBAM Ping An ChiNext ETF (CXS) and United SSE 50 China ETF (JK8) – which offer investors exposure to stocks listed in mainland China only. The trio posted a more resilient performance in August with average returns of -5.7% compared to average return of -7.3% across all China equities ETFs.
More details of the nine China-focused ETFs can be found in the September 2023 Monthly Highlights of China-focused ETFs.