APAC Investors See Through Elections Fog, Focus On Central Banks, Rates – Schroders

Expectations Of A Clearer Central Bank Direction In The Next Few Months

While elections are due in some of the largest Asian markets later this year, investors should look past these political events to focus on the impact of central bank policy on financial markets, according to Schroders’ Head of Asian Equities King Fuei Lee.

In a recent interview with CNBC, Lee said he expects most of the upcoming elections in Asia to result in the incumbent governments retaining power, which should not bring about significant changes to the short-term outlook for equity markets.

He added that investors should instead focus on the direction of interest rates, which will be largely determined by the actions of central banks.

Policy Divergence Between Region’s Central Banks Could Drive Volatility

Lee highlighted that the divergence in monetary policy stances between central banks in the Asia-Pacific region is likely to drive volatility in currency and bond markets.

He explained that while the US Federal Reserve is expected to continue raising rates, central banks in China and Japan are likely to maintain their accommodative stances.

This divergence could lead to a stronger US dollar and weaker currencies in other Asian countries, which could have implications for equity markets.

China’s Economy Remains A Key Factor

Lee also emphasized the importance of China’s economy, which is the largest in the Asia-Pacific region.

He said that while the country’s growth has slowed in recent years, it is still expected to remain a major driver of global growth.

Lee added that investors should watch for signs of improvement in China’s property market, which has been a drag on the economy.

Valuations Remain Attractive Despite Recent Sell-Off

Despite the recent sell-off in global equity markets, Lee said valuations in Asia remain attractive.

He explained that many Asian companies are trading at a discount to their global peers, which provides potential upside for investors.

Lee added that he is particularly positive on the outlook for the technology sector in Asia, which he believes is well-positioned to benefit from the region’s growing middle class.