2022 was a difficult year for many Asian markets with a combination of slowing growth, rising interest rates and a strong US Dollar posing challenges. But with the International Monetary Fund (IMF) forecasting the region to grow by 4.6% in 2023, compared to global growth of 2.8%, the prospects look brighter.
While Asian markets are often lumped together, they can behave quite differently. Some countries in the region are rich in commodities and natural resources, while some rely on exporting goods to western economies, and others have vibrant local consumer-driven growth.
Although the region’s export-focused economies continue to face headwinds from sluggish global growth, economies across Asia are set to benefit from the China re-opening effect. This follows a prolonged period of depressed economic activity. The rebound should be most evident in consumer goods and tourism as consumers make up for lost time.
Pinpointing when the direction for global interest rates will change is near impossible. However, it’s highly likely we’ve already seen the bulk of rate rises in this cycle. Reaching the peak or seeing rates start to fall later this year could provide a tailwind for share prices by taking pressure off local Asian policy rates, bond yields and currencies.
There are plenty of growth opportunities in Asia, but there can be a big difference in standards in areas like corporate governance. This can expose investors to a higher risk of nasty surprises.
This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice.
How have stock markets performed?
Over the year to the end of April 2023, the emerging stock market has fallen by 5.78%*, while the Asia Pacific ex Japan market lost 5.42%. This compares with a gain of 3.24% for the broader global stock market. As always past performance isn’t a guide to future returns.
Performance of the underlying markets has been mixed though. Singapore has been the strongest of the main markets with a gain of 4.69%. On the other hand, China has been the weakest, losing 10.54%.
Asian and emerging stock markets – one year performance
Past performance isn’t a guide to the future. Source: *Lipper IM, to 30/04/2023.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Apr 18 – Apr 19 | Apr 19 – Apr 20 | Apr 20 – Apr 21 | Apr 21 – Apr 22 | Apr 22 – Apr 23 | |
| FTSE Asia Pacific ex Japan | 2.68% | -5.57% | 37.38% | -7.22% | -5.42% |
| FTSE China | -4.73% | -3.95% | 37.92% | -29.46% | -10.54% |
| FTSE Emerging | 3.23% | -8.66% | 33.94% | -5.98% | -5.78% |
| FTSE India | 6.47% | -17.87% | 41.22% | 30.25% | -6.99% |
| FTSE Korea | -13.43% | -7.20% | 67.71% | -16.95% | -9.72% |
| FTSE Singapore | -1.84% | -16.76% | 22.05% | 17.60% | -4.69% |
| FTSE World | 11.69% | -1.00% | 33.87% | 6.09% | 3.24% |
If you’re looking to invest in emerging markets and are happy with the higher risks that come with investing in the region, a broad global emerging markets or Asian fund could be a good starting point. Other funds could then be added to a portfolio for more exposure to a particular theme, area, or country. When investing here though, it’s essential to take a long-term view.
How have Wealth Shortlist funds performed?
Asian and emerging markets Wealth Shortlist funds have delivered mixed performance over the year. We usually expect this. A range of managers with different strengths, styles and areas of focus will perform differently in different economic conditions.
Remember, past performance isn’t a guide to the future, and performance here is over a short time. All investments fall as well as rise in value, so you could get back less than you invest.
Investing in funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a long-term diversified portfolio.
For more details on each fund and its risks, please see the links to their factsheets and key investor information below.
Asia
The strongest performer of our Asian Wealth Shortlist funds over the last year has been the Jupiter India fund.
The fund invests in companies of all sizes but invests more in higher-risk small and medium-sized companies than some other India funds. The fact the manager invests differently gives it the potential to perform better than the Indian market, though the reverse is also true.
The weakest performer of our Asian Wealth Shortlist selections over the last year was the iShares Pacific ex Japan Equity Index fund.
The fund invests in a broad spread of companies based across the developed Asia and Pacific region, including Australia, Hong Kong and Singapore, as well as less mature economies like Taiwan and Malaysia.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Apr 18 – Apr 19 | Apr 19 – Apr 20 | Apr 20 – Apr 21 | Apr 21 – Apr 22 | Apr 22 – Apr 23 | |
| Jupiter India | -8.04% | -23.56% | 27.98% | 31.63% | 2.27% |
| FTSE India | 6.47% | -17.87% | 41.22% | 30.25% | -6.99% |
| iShares Pacific ex Japan Equity | 2.10% | -6.92% | 43.87% | -0.59% | -4.52% |
| FTSE World Asia Pacific ex Japan | 2.46% | -7.16% | 45.66% | -1.08% | -4.83% |
Past performance isn’t a guide to the future. Source: Lipper IM, to 30/04/2023.
More about Jupiter India, including charges
Jupiter India Key Investor Information
More about iShares Pacific ex Japan Equity Index, including charges
iShares Pacific ex Japan Equity Index Key Investor Information
Emerging markets
The strongest performer of our Wealth Shortlist selections in the emerging markets sector over the last year was the Schroder Asian Discovery fund, though it still lost money.
The fund invests in smaller businesses based in Asian and emerging markets or that make most of their money in these areas. These businesses offer lots of growth potential. However, they're higher risk because they're at an earlier stage of their development. They also haven't tended to hold up as well in a falling market.
The weakest performer of our Wealth Shortlist selections in the emerging markets sector over the last year was the iShares Emerging Markets Equity index fund. The fund invests in a broad spread of companies based across emerging countries, including China, Taiwan, India and Hong Kong.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Apr 18 – Apr 19 | Apr 19 – Apr 20 | Apr 20 – Apr 21 | Apr 21 – Apr 22 | Apr 22 – Apr 23 | |
| Schroder Asian Discovery | -3.07% | -16.78% | 52.53% | -3.63% | -2.54% |
| iShares Emerging Markets Equity Index | 2.31% | -7.92% | 30.75% | -6.47% | -5.09% |
| FTSE Emerging | 3.23% | -8.66% | 33.94% | -5.98% | -5.78% |
Past performance isn’t a guide to the future. Source: Lipper IM, to 30/04/2023.
More about Schroder Asian Discovery, including charges
Schroder Asian Discovery Key Investor Information
More about iShares Emerging Markets Equity Index, including charges
iShares Emerging Markets Equity Index Key Investor Information
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