After unstable Q1, experts still reasonably positive about APAC markets

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Goldman Sachs says it's 'increasingly constructive' on China's economic growth

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“China’s growth recovery and north Asia’s earnings rebound in 2024 remain our key investment themes and overweight areas,” Goldman Sachs’ strategists, led by Timothy Moe, composed in a Saturday note.

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It’s been a significant quarter for Asia-Pacific stock exchange, however strategists are anticipating the area to be in much better shape than its international peers.

Stocks in the Asia-Pacific were blended on the very first day of trade of the 2nd quarter of the year, with financial experts forecasting China’s healing will cushion the dampening impact of high international rate of interest on the local economy.

Mainland China’s bourses led gains in the broader area on Monday, with the Shenzhen Component closing its session 1.4% greater and the Shanghai Composite up by 0.72%.

“China’s growth recovery and north Asia’s earnings rebound in 2024 remain our key investment themes and overweight areas,” Goldman Sachs’ strategists, led by Timothy Moe, composed in a Saturday note.

The company repeated its expectations for China’s economy to grow by 6% this year– more than the federal government’s target of “around 5%.” The Goldman strategists stated their views are supported by strong activity information seen in the previous quarter.

China’s main production buying supervisors’ index increased to 52.6 in February, marking the greatest reading of factory activity information because April 2012, prior to being up to 51.9 in March.

S&P Global Ratings, in its 2nd quarter outlook report, included that although China’s development might not entirely eliminate the effect of a worldwide downturn on Asia-Pacific markets, it will supply some assistance.

“China’s economy is on track to recover this year. For other economies this will dampen but not offset the hit of slower growth in the U.S. and Europe, the fading impact of domestic re-opening post the pandemic, and higher interest rates,” S&&(***************************************************************************************************************************************************************************************************************************************************************************** )Asia-(**************************************************************************************************************************************************************************************************************************************************************************** )financial experts Louis Kuijs and Vishrut Rana composed in the report.

“We maintain our cautiously optimistic outlook for Asia-Pacific,” S&P financial experts composed.

‘Rollercoaster’ Q1

Goldman Sachs strategists indicated the volatility seen in Asia-Pacific stocks in the very first quarter for the year.

“The first quarter of 2023 was a rollercoaster for investors in Asian regional equities,” the strategists composed in the note.

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The MSCI Asia Pacific ex-Japan index saw gains of approximately 11%, peaking at around 560 levels at completion of January.

It eliminated all of the gains by mid-March to fall listed below levels seen at the start of the year, and just recently saw a rally of about 5%. That puts the index at a year-to-date gain of 3.62% since recently’s close.

The index fell almost 0.24% in an unpredictable very first trading day of the quarter on Monday.

‘Relatively resistant’ to banking tensions

Goldman Sachs strategists included that total macroeconomic conditions are helpful for markets in the Asia-Pacific

“The partial replacement of expectations of higher Fed rate hikes by lower US growth is relatively more favorable for most Asian economies,” Goldman strategists composed, including that “Asia appears reasonably resistant to the current DM [developed markets] banking tensions,” describing current banking chaos in the United States and Europe.

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BNP Paribas took a comparable view.

“We think risks to Asian banks are limited,” BNP Paribas’ Manishi Raychaudhuri stated in a March 27 note, explaining the area’s debt-to-GDP ratios as reasonably “safe.”

“Asia’s USD debt fell over the past 3 years and most Asian economies’ forex reserves appear safe relative to forex debt,” he composed in the note.

“Liquidity remains abundant in Asia. Interest rates also have not risen too sharply in Asia,” he stated.