Amber Sinha, senior portfolio manager of global equities at CIBC Asset Management, said that during previous waves of Covid, Asia has generally lagged behind other regions. “This is in large part because of their approach to the pandemic,” he said in an interview.
Since the start of 2020, the MSCI Asia-Pacific index has been quite far behind the MSCI World index, said Sinha, up 19% over the period, compared to 42% for global equities.
Asia-Pacific the index ended 2021 down 1.19% in US dollars, while the MSCI World Index was up 22.35%.
NOTNorth Asian economies – including Japan, South Korea, Taiwan, China and Hong Kong – have imposed tighter pandemic restrictions, in some cases adopting “zero-Covid” policies, said Sinha. “This kind of cautious approach certainly makes the economic recovery even longer.”
In India and Southeast Asia, declining vaccination rates, a lack of adequate hospital infrastructure and “sub-par application” have taken their toll, he said.
Leisure and travel businesses have been hit the hardest, Sinha said, but he also hasn’t seen retail return like it has in the West. One of the reasons for this could be the lack of government support and the lack of a spike in the savings rate in Asia. As a result, Asia hasn’t seen demand strengthen like it has in the West, Sinha said.
Second, Sinha said e-commerce is less developed in much of Asia. When the lockdowns are spread around the world, most consumers turn to e-commerce, but “not so much in Asia,” Sinha said, leading to weakness in the retail sector.
Additionally, Asian benchmarks often score high for Chinese tech stocks, which were hit hard in 2021 not so much because of the pandemic, but because of government regulation.
“The government’s increased interest in the operating models of these companies weighed on these actions,” Sinha said.
And as Chinese internet companies like Alibaba and Tencent are an integral part of the MSCI Asia-Pacific Index, they detracted from overall performance.
Finally, supply chain problems weighed on the major car manufacturers in Asia. While auto demand has been strong, Japanese and Korean automakers have been unable to fully realize the benefits due to supply chain and semiconductor issues, Sinha said.
However, Sinha said all hope is not lost. “Due to the underperformance of the Asia-Pacific market stocks during Covid, if the world at some point overtakes Covid, I think the results in Asia can be quite profitable, ”he said.
He likes companies like Toyota and Sony that are exposed to global markets where demand remains strong. All of the issues that these companies are facing right now are probably sourcing, “so as the supply corrects, I think some Japanese companies will tend to do very well in this environment,” Sinha said.
The semiconductor industry – where Japan, Korea, and Taiwan play a leading role in global production – is another strong element, and Sinha also likes some companies in the robotics and automation industries.
“The pandemic will definitely drive demand for their equipment forward,” he said, adding that automation is going to be a more structural trend in the future.
Last but not least, Sinha said there could be some opportunities in Chinese tech stocks.
“They’ve lost their value quite significantly, and that’s because there should be more government oversight, which can only be negative for their returns,” he said. declared.
However, he added that “it is definitely worth looking for stocks that have sold more than they deserve.”
This article is part of the AdvisorToGo program, powered by CIBC. It was written without the contribution of the sponsor.