Investment Opportunities in Asian Markets: Analysis and Strategies for 2024

Asian markets today represent one of the largest sources of opportunities for global investors. As Benjamin Graham pointed out, stocks become more attractive when their prices fall significantly. Based on this premise, the Asian region, especially China, presents interesting conditions for those seeking to position themselves strategically. What is really happening in these markets, and what should you know before investing?

Current performance of the main indices

The reality of Asian markets at this moment is mixed. China, as the economic engine of the region, has experienced a considerable deterioration. The three main Chinese stock exchanges — Shanghai, Hong Kong, and Shenzhen — have seen approximately $6 trillion in market capitalization disappear since their peaks in 2021.

The numbers speak for themselves: the China A50 index has retreated 44.01%, the Hang Seng 47.13%, and the Shenzhen 100 51.56% during this period. This sustained decline results from multiple converging factors: the impact of abandoning Covid-Zero policies, increased regulatory scrutiny over the tech sector, structural real estate crisis, weakening external demand, and trade competition with the United States in high-tech sectors.

What actions are authorities taking?

In response to this scenario, monetary policymakers have reacted. The Chinese central bank has reduced the Reserve Requirement Ratio by 50 basis points, freeing approximately 1 trillion yuan to inject liquidity into the system. The most aggressive measure under consideration is a stabilization package of 2 trillion yuan from state offshore funds, aimed at buying stocks and containing massive sell-offs.

Simultaneously, the one-year lending prime rate has remained at historic lows of 3.45% since late 2021. However, these measures come after months of speculation and have limitations: China is experiencing deflation, indicating lower domestic consumption, and economic growth in Q4 2023 was only 5.2%, well below the country’s historical standards.

The geography of Asian markets

The Asian region concentrates most of the world’s population and has experienced a gradual shift of the global economic center toward this continent. The most important Asian markets are distributed as follows:

China leads with three main exchanges: Shanghai Stock Exchange (the largest in Asia with a market cap of $7.357 trillion), Hong Kong Exchanges ($4.567 trillion), and Shenzhen Stock Exchange ($4.934 trillion). Together, these three reach $16.9 trillion.

Japan holds second place with its Tokyo Stock Exchange at $5.586 trillion, although it has lost relative relevance after decades of economic stagnation.

India ranks as the fifth-largest economy worldwide, with its Bombay Stock Exchange providing access to over 5,500 companies.

Other significant Asian markets include South Korea, Taiwan, Singapore, Australia, and New Zealand among developed economies, while Indonesia, Thailand, Vietnam, the Philippines, and Malaysia represent the emerging segment.

Operating hours and liquidity windows

For traders operating from Europe, Asian market hours present specific opportunities. For example, from Madrid:

• Shanghai, Shenzhen, and Hong Kong operate with a 7-hour difference (GMT+8)
• Tokyo operates with an 8-hour difference (GMT+9)
• The overlap of these markets occurs between 2:30 a.m. and 8:00 a.m., a period that concentrates maximum liquidity and volume

This “Asian overlap” is crucial to avoid execution issues and slippage, especially when trading derivatives.

Technical analysis of main indicators

China A50

The China A50 index, which tracks the 50 largest and most liquid A-shares from Shanghai and Shenzhen, is currently trading at $11,160.60. Although it reached an all-time high of $20,603.10 in February 2021, it remains in a downward trend. It is 9.6% below its 50-week exponential moving average ($12,232.90).

The Relative Strength Index fluctuates in a bearish consolidation below the 50 level. Key support levels are at $8,343.90 (2015 lows) and $10,169.20 (2018 lows), while relevant resistance is at $15,435.50.

Hang Seng

This index, covering 65% of Hong Kong’s market capitalization with over 80 companies, is trading at HK$16,077.25 and also shows a bearish structure. The next relevant levels are at HK$18,278.80 and HK$24,988.57, the latter requiring significant macroeconomic changes.

Shenzhen 100

Measures the performance of the top 100 Shenzhen A-shares. Since its peak of 8,234 yuan in February 2021, it has fallen to 3,838.76 yuan, 16.8% below its 50-week average. The RSI is nearly in oversold territory.

Structural challenges of Asian markets

The region faces four main challenges:

Geopolitical instability: The Korean Peninsula, Taiwan Strait, South China Sea, and India-China border are potential tension points with impacts on trade and security.

Economic slowdown: China will moderate its growth, affecting economies dependent on regional trade. The post-pandemic recovery remains incomplete.

Demographic transition: Aging populations, low birth rates in China, rapid urbanization, and labor market changes will generate pressures on social security costs and workforce availability.

Climate change: The region faces increasing vulnerability to extreme events, contributes 50% of global greenhouse gas emissions, and must balance development with energy transition.

The global perspective: Asian markets versus US hegemony

Although Asian markets have gained relevance, the United States maintains a dominant position. By 2022, the country accounted for 58.4% of global market capitalization. The main Asian markets (Japan, China, and Australia) represented 12.2% combined.

However, this perspective requires historical context: Japan once held 40% of the global market in 1989 before its long decline. The role of the state in Asian economies, particularly in China, could limit future stock market growth opportunities due to regulatory restrictions and state control over key sectors.

Investment options in Asian markets

Direct stock purchase: Major Chinese companies like State Grid ($530 billion in annual revenue), China National Petroleum, and Sinopec operate as state-owned enterprises with restrictions for retail foreign investors. More accessible alternatives include JD.com, Alibaba, Tencent, BYD, and Pinduoduo, traded via ADRs on Western exchanges.

Derivative instruments: Contracts for Difference (CFDs) allow speculation on Asian markets without owning underlying assets, offering greater operational flexibility and leverage.

Conclusion: What should you monitor

Asian markets currently present a juxtaposition of opportunities and risks. The key to making informed decisions lies in closely following monetary, fiscal, and regulatory policy announcements from China. The stimulus measures announced so far are initial steps, but their effectiveness will depend on broader political coordination and timing.

If you plan to invest in Asian markets, especially China, the next quarter will be decisive. Visible improvements in economic indicators combined with more favorable policies could catalyze significant recoveries in these currently depressed indices.