Asian stocks, the laggards in global markets over the past three years, offer significant upside potential because of their attractive valuations, with the impacts of weak China growth and interest-rate spikes wearing off, according to a veteran fund adviser.
Markets in China, Southeast Asia and some developed economies in Asia would reward investors over the long term, according to Richard Lawrence Jnr, founder of Overlook Investments in Hong Kong. Low ownership among global funds left plenty of room for stock gains, he added.
“We are early in the foothills of recovery,” he said in an email interview. “Asian markets are trading at low valuations and being largely ignored by global investors. Such conditions typically set the stage for significant long-term returns.”
Lawrence is the executive chairman of Overlook Investments, which he founded in 1991. His firm manages about US$7 billion of assets. He has four decades of experience in the region, witnessing turmoil like the Asian currency crisis in 1997, the Lehman Brothers’ collapse in 2008 and the Covid-19 pandemic.
Asian stocks trade at 16 times earnings on average, cheaper than the 21 times multiple investors are paying for global equities, according to Bloomberg data.
Since 2022, the MSCI Asia-Pacific Index has risen 19 per cent, while the MSCI World Index climbed 44 per cent and the Nasdaq 100 index surged 78 per cent. The returns reflect the impacts of US interest-rate hikes in the US and China’s economic slowdown, as well as policies powering US exceptionalism.