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Investors shift from India to China, Taiwan and Korea in November 2022: Rotation started in Asia

The revival in the North Asian equities is being utilized as the start of a potential run as China’s reopening of the chip industry is intensifying.

Strategists at Golman Sachs Group Inc. have predicted that Asia’s equity leadership to shift from Southeast Asia Indian markets to China and Korea next year.

Other analysts have stated that Taiwan’stech industry is an infection point. The same views have been shared by Jefferies Financial Group Inc.

Stocks that were listed in Hong Kong and Korea, and Taiwan have resulted in a heavy reliance on China’s economy. This has been affected by the strict covid controls and a property crisis.

On the other hand, the increasing domestic demand has resulted in the demands of the southern markets of Indonesia and India.

But, the tables have turned this month after positive policies have taken place in Beijing.
Alexander Redman, the chief executive strategist at CLSA has mentioned that Southeastern Asia has begun to underperform in the markets for the last few weeks.

Indonesia being a defensive, domestically-oriented community exporter took a part in the equity storm.
Key equity gauges have increased by 20 percent in November, which has secured the top position in the rest of Asia and other global countries, as China has employed a zero-covid policy and boosted policy for the real estate sector.

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Foreigners have invested 5.8 billion USD in Taiwan stocks this month. It has been the first greatest inflow within six months and the first time in the last fifteen years.

The net purchases of Korean shares have increased by 2 billion USD for the second month consecutively.

However, Indonesia, which is one of the inflation hedges for investors declined in November and was expected to see monthly flows turn negative for six months since July.

Investors are worried about valuations in India where the benchmarks have recorded the highest. However, Goldman and Sachs have expected the Indian market will underperform in 2023.

Any changes in the Chinese policy, including the re-opening of the lockdowns followed by the policy support, will result in the rerating of China.

The brokerage is burdened by Hong Kong, China, Korea, and Taiwan, and proved to be neutral in Indonesia and underweight in India.

The shift of interest of investors in China:

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The overweight in South Asian countries, including Korea and Taiwan contributed to the dominance of the chip industry. It is because these countries are the major industrial markets like Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. In addition, they have China as the largest partner.

SocGen and Lombard Odier Private Bank this month joined Morgan Stanley, stating that the investors should move back into investing in semiconductor stocks.
The share prices have declined typically in the last two to three quarters ahead of the end of the semiconductor cycle.

Chinese shares in Hong Kong have shoed the best monthly showing since 2006 as the asset managers from M&G investments and Eastspring Investments to Franklin Templeton investments bought the shares.
Foreign funds have increased by 49 billion yuan valued stocks with trading links with Hong Kong on the mainland.

The road to North Asia will not be smooth.

The high export dependence has resulted in the market being vulnerable to the risk of the global recession and is often in the middle of the geopolitical tension that involves the US and China.

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Further, the increase in the covid-19 cases in China has resulted in damage to the positive market memorandum.
Vivian Lin Thurston, the portfolio manager at William Blair Investment Management has stated that there are ongoing concerns related to the geopolitical aspect of the consideration.

She has further mentioned that even if the industry cycle is growing, the global economy is getting into a slowdown.

Equity benchmarks in China, Taiwan, and Korea have declined by 15 percent while those in India and Indonesia have decreased by 7 percent.

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