Globally, the continued blockage of global supply chains and soaring commodity prices have exacerbated the dilemma of major central banks, i.e. push up overall inflation, further containment of real incomes, economic activity and core inflation. Certainly, the macroeconomic situation became more complicated due to the Russian-Ukrainian crisis.
Meanwhile, the best performing sectors for equities year-to-date, are energy (41.3%), Agricultural products (25%) and industrial metals (21.5%). This reflected a worsening of global supply shortages after excluding supplies from key producers such as Russia.
The stock markets that benefited from rising commodity prices all outperformed, such as Canada, Brazil, Indonesia and Australia. In addition, relative to other weak assets, the US dollar, Chinese government bonds, US Treasury bills and precious metals performed well, reflecting the safe-haven nature.
While the Asia-Pacific region is not a whole, the impact of the region is different. Under the Russian-Ukrainian crisis, the supply of food, raw materials and energy has decreased and prices have risen, and the Asia-Pacific region is vulnerable. It should be reminded that the Asia-Pacific region is not a whole in nature, and the impacts faced by the region are also different. Hence, investors need to consider further diffusion effects such as Inflation and inflation expectations may heat up; Can the economy leverage strong export growth to substantially offset higher food and energy import prices; and/or can its policy space withstand a further deterioration in fiscal conditions; Potential liquidity/ credit shocks.
5 economies are expected to perform relatively well
In screening for economies not affected by the potential shock, four countries are expected to be the biggest beneficiaries of rising prices: Singapore, Malaysia, Australia and New Zealand. The countries that appear to be least affected by potential liquidity are: Indonesia, the Philippines, New Zealand and India.
After balancing the impact of the above two shocks, the agency concluded that Australia, Vietnam, Malaysia, New Zealand and Indonesia will achieve better macro performance.
Asia-Pacific stock market analysis
In terms of investment outlook for equities in the Asia-Pacific region, since the Russian-Ukrainian crisis, Indonesia, Malaysia, Australia, Vietnam and New Zealand have all outperformed other regional markets. Investors should also take into account factors such as geopolitical situation; Global liquidity withdrawal; Stagflation environment; Neither is a common cause of outperformance in emerging market equities over a period of time.
China’s economy is expected to slow down, with the key challenges such as Supply chain blocked; The economic costs of the zero-clearing policy are rising; The development trend of the real estate industry has deteriorated; Global consumption patterns are readjusted.
In addition, the Chinese government’s draft budget report showed that officials expected economic growth to be even lower than the official target. A cautious optimism should be placed on China’s medium- to long-term economic growth prospects due to high debt levels, serious demographic challenges and an increasingly zero-sum global economic environment. Relative to the previous easing cycle, support policies are still moderate and insufficient, especially considering the current economic headwinds.
