Practical Guide: Investing in Asian Markets in 2024

Investment analyst Benjamin Graham left a maxim that remains relevant today: stocks pose greater risk when their prices rise, and less when they fall. From this perspective, Asian financial markets currently present a buying potential outlook, especially in the Chinese context. This analysis provides you with key elements to understand the current situation and make informed decisions in 2024.

Current State of Asian Stock Markets: The Chinese Challenge

Investor attention in Asian markets is mainly focused on China, where both structural and cyclical challenges converge. The figures are compelling: from 2021 to date, the country’s top three stock exchanges (Shanghai, Hong Kong, and Shenzhen) have lost approximately $6 trillion in market capitalization.

The impact on major stock indices has been severe. During 2021-2024:

• The China A50 index retreated 44.01%
• The Hang Seng fell 47.13%
• The Shenzhen 100 plummeted 51.56%

What has caused this collapse in Asian stock markets? A combination of factors:

• The consequences of the Covid-Zero policy
• Increased regulation over tech giants
• Structural crisis in the real estate sector
• Decline in external demand due to global slowdown
• Trade tensions with the United States, particularly in technology and semiconductors

The result is a Chinese economy that has stopped growing at double digits. Foreign direct investment is decreasing, manufacturing is migrating to India, Indonesia, and Vietnam, and the population is aging significantly.

Authorities’ Response: Stimulus Measures

The Chinese central bank (PBOC) has begun to intervene. Implemented actions include:

Liquidity injection: Reserve Requirement Ratio cut by 50 basis points, releasing approximately 1 trillion yuan (139.45 trillion dollars).

Stock market rescue plan under discussion: A package of 2 trillion yuan (278.90 trillion dollars) from offshore funds of state-owned enterprises, designed to buy securities and contain mass selling.

Interest rate policy: 1-year preferred loan rates remain at a minimum level of 3.45%, down from late 2021.

However, these measures take time to show effects. China is experiencing deflation, indicative of lower domestic consumption. The growth in Q4 2023 was 5.2%, below expectations and far from the boom of previous decades.

Mapping Major Asian Financial Markets

Asia is the largest and most populous continent, and has shown for decades a shift of the global economic center toward this region. The main Asian stock exchanges operate in:

China: Dominates with three major exchanges. Shanghai Stock Exchange leads with a market cap of $7.357 trillion (2023), followed by Shenzhen (4.934 trillion) and Hong Kong Exchanges (4.567 trillion). Together, Chinese markets total $16.86 trillion.

Japan: Tokyo maintains $5.586 trillion in market cap, second in the region. It was formerly the leader, but prolonged stagnation changed the hierarchy.

India: With the fifth-largest economy, its Bombay stock exchange includes over 5,500 companies, positioning as an alternative to traditional Asian markets.

Emerging markets: Indonesia, Thailand, the Philippines, Vietnam, and Malaysia show variable growth. South Korea, Australia, Taiwan, and Singapore have already reached high development levels.

In terms of global dominance, the United States accounts for 58.4% of the world market (2022). The main Asian markets together account for just 12.2%, although this reflects a notable recovery from historically weaker positions.

Trading Hours: Key for Global Traders

If you operate from Europe (CET/GMT+1), the hours to access Asian markets require precision:

Time differences from Madrid:

• Tokyo (GMT+9): 8 hours difference
• Shanghai, Shenzhen, Hong Kong (GMT+8): 7 hours difference

To trade these Asian markets in real-time from Madrid, the active window is from 1:00 a.m. to 9:00 a.m.

Overlap of hours: The optimal period occurs between 2:30 a.m. and 8:00 a.m., when all four markets operate simultaneously, ensuring liquidity and volume. This “Asian overlap” creates significant opportunities for traders in other time zones.

Structural Challenges of the Asian Market

The region faces four critical challenges:

1. Geopolitical instability: Multiple potential conflict hotspots (Korea, South China Sea, Taiwan, India-China border) threaten regional and commercial stability.

2. Economic slowdown: China will maintain more modest growth, causing cascading effects on economies dependent on Chinese trade and tourism. Post-pandemic recovery remains incomplete.

3. Demographic transition: Aging population, accelerated urbanization, and labor talent shortages exert pressure on social welfare costs and productivity.

4. Climate change: The region is vulnerable to extreme events and contributes about 50% of global emissions. Balancing development with sustainability is imperative.

Technical Analysis of Major Indices

China A50: Tracks 50 Shanghai and Shenzhen A-shares, representing leading companies by market cap. The index remains in a downtrend since February 2021 (high of 20,603.10$). It currently trades at 11,160.60$, 9.6% below the 50-week moving average (12,232.90$). The RSI fluctuates below the mid-zone, indicating bearish consolidation. To reverse the trend, a sustained break above this average with an upward slope change is needed.

Hang Seng: Capitalization-weighted index covering 65% of Hong Kong and grouping 80+ companies. Currently at 16,077.25 HK$, also in a bearish zone. Key levels: 18,278.80 HK$ (near resistance) and 24,988.57 HK$ (distant resistance, depending on China’s economic recovery).

Shenzhen 100: Measures the top 100 Shenzhen A-shares. From the all-time high of 8,234.00 yuan (February 2021), it has fallen to 3,838.76 yuan. RSI is in oversold territory (near 30), suggesting potential rebound. Critical supports are at 2,902.32 yuan (2018 low) and resistance at 4,534.22 yuan.

Investment Opportunities in Asian Markets

Direct investment in stocks: Major Chinese corporations compete with Western giants. State Grid, China National Petroleum, and Sinopec lead by revenue but face restrictions for foreign retail investors. More accessible alternatives include JD.com, Alibaba, Tencent, Pinduoduo, Vipshop, and BYD (automaker). These can be purchased via ADRs on Western exchanges.

Indirect investment: Contracts for Difference (CFD) allow speculation without acquiring underlying assets, offering flexibility and leverage. Specialized platforms facilitate access to these derivatives.

Key Recommendation for 2024

Asian markets, particularly Chinese, present latent opportunities conditioned on two critical factors:

1. Improvement in economic activity: Indicators showing real recovery, not just temporary stimulus.

2. Friendly policies: Regulatory changes that favor business, especially in technology and real estate.

The practical advice is straightforward: keep constant watch on announcements of Chinese monetary, fiscal, and regulatory policies. These moves will be leading indicators confirming whether Asian markets will complete their reversal or continue in weakness. In depressed markets like the current, the key is not perfect timing, but identifying when fundamental conditions begin to change.