Investment opportunities in the Asian market during 2024: In-depth analysis

The Current Context of the Asian Market

The Asian continent today concentrates the epicenter of global economic transformations. Despite the cyclical challenges it faces, particularly in its largest economy, the Asian market maintains an extraordinary potential for investors willing to identify strategic entry points. As Benjamin Graham, the father of fundamental analysis, argued, true opportunities arise when prices collapse, not when they reach all-time highs.

That is precisely the outlook that the Asian market presents at this moment: depressed valuations that could be laying the groundwork for substantial future gains if economic recovery materializes.

The Present Situation: Unprecedented Retreat in China

The reality confronting the Asian market in 2024 revolves around structural and cyclical problems plaguing the Chinese economy. Since 2021, the three main stock exchanges in China’s Asian market have experienced cumulative losses exceeding 6 trillion dollars in market capitalization.

The figures are compelling:

• China A50 Index: down 44.01%
• Hang Seng Index: down 47.13%
• Shenzhen 100 Index: down 51.56%

These cumulative plummets reflect the convergence of multiple adverse factors that have severely impacted the Asian market: the failure of the COVID-Zero strategy, intensified regulation over the tech sector, deep crisis in the real estate market, contraction of international demand, and trade competition with the United States, especially in access to cutting-edge semiconductor components.

Public Policy Responses in the Asian Market

In response to this critical outlook, China’s central bank has begun mobilizing tools to revive the Asian market. The announced measures include reductions in reserve requirement ratios and the consideration of a stabilization capital package of approximately 2 trillion yuan (279 billion dollars). These initiatives reflect recognition that the Asian market requires significant interventions to reverse the current trend.

However, there is a significant time lag: the measures come after months of pressure, and their coordination within an overall development strategy remains somewhat vague. The central bank has maintained preferential credit rates at historic lows of 3.45%, a clear sign of an expansionary orientation in the Asian market.

Global Dimension of the Asian Market

The Asian market currently accounts for approximately 12.2% of global stock market capitalization, a notable figure but one that loses perspective when recalling that just three decades ago, Japan accounted for only 40% of the global market.

The largest exchanges in the Asian market by capitalization are:

• Shanghai: 7.357 trillion dollars
• Tokyo (Japan): 5.586 trillion dollars
• Shenzhen: 4.934 trillion dollars
• Hong Kong: 4.567 trillion dollars

Together, the stock exchanges of the Chinese Asian market reach a combined capitalization of 16.860 trillion dollars, establishing the region as the second financial power hub worldwide after the United States.

Characteristics and Structure of the Asian Market

The Asian market extends beyond China. India, the fifth-largest economy in the world, operates major exchanges such as Bombay with access to over 5,500 companies. South Korea, Australia, Taiwan, Singapore, and New Zealand represent developed economies with robust markets. Meanwhile, Vietnam, Indonesia, Thailand, the Philippines, and Malaysia embody emerging economies with heterogeneous but promising growth rates.

Sector diversification in the Asian market is remarkable: finance, technology, manufacturing, utilities, real estate, and commerce coexist within their respective exchanges.

Time Dynamics and Trading Windows

For those wishing to participate in the Asian market from Western Europe, understanding overlapping hours is crucial. Specifically, the Asian market offers maximum liquidity between 2:30 a.m. and 8:00 a.m. (GMT+1), during which Shanghai, Shenzhen, Hong Kong, and Tokyo are simultaneously trading.

This “Asian overlap” provides sufficient volume for both stock and derivatives operations, becoming a strategic window for investors from other regions seeking access to the Asian market.

Structural Challenges Defining the Asian Market

The Asian market faces four major challenges:

Geopolitical tensions: The region concentrates potential conflict hotspots (Korean Peninsula, South China Sea, Taiwan Strait, India-China border) that could escalate into trade or military confrontations.

Economic slowdown: China will moderate its historic growth rates, affecting business ecosystems and investment across the Asian market that depended on its voracious consumption.

Demographic transformations: Aging populations, accelerated urbanization, and migration create pressures on social security and the labor market in the Asian region.

Environmental pressures: The Asian market contributes approximately half of global greenhouse gas emissions, facing the need to reconcile development with sustainability.

Technical Analysis of Major Asian Indices

China A50

This index tracks 50 of the largest-cap class A shares in the continental Asian market. It has maintained a downtrend initiated in February 2021 when it reached highs of 20,603.10 dollars. The current price of 11,160.60 dollars implies a 9.6% distance from its 50-week moving average. The Relative Strength Index fluctuates in a bearish consolidation zone, requiring confirmation of a sustained bullish breakout to change its narrative.

Critical levels to monitor: 8,343.90 dollars (2015 lows), 10,169.20 dollars (2018 lows), 12,288.00 dollars (intermediate resistance), and 15,435.50 dollars (major resistance).

Hang Seng

Weighted by capitalization, this index of the Asian market tracks over 80 Hong Kong companies representing 65% of its total capitalization. It is currently trading below both its trendline and its 50-week moving average at 16,077.25 HK$. The technical indicator suggests persistent bearish consolidation.

Next relevant levels: 10,676.29 HK$ (critical support), 18,278.80 HK$, and 24,988.57 HK$ (distant resistances requiring confirmation of structural changes).

Shenzhen 100

Tracks the 100 largest class A shares in Shenzhen. Since its peak of 8,234.00 yuan in February 2021, it has retreated to 3,838.76 yuan, 16.8% below its 50-week average. The RSI is nearly in oversold territory (30).

Main supports: 2,902.32 yuan (2018 lows) and 4,534.22 yuan (2010 historical highs).

Investment Opportunities and Strategies in the Asian Market

Chinese stocks in the Asian market face temporary pressure but present an asymmetric opportunity if stimulus policies realize their potential and economic activity recovers.

Direct Participation

The largest corporations in the Asian market rival Western giants. State Grid, the world’s leading utility, reported annual revenues of 530 billion dollars. Companies like China National Petroleum and Sinopec operate at similar scales but face restrictions for foreign retail investors.

More accessible alternatives within the Asian market include JD.com (e-commerce with 156 billion dollars annually), Alibaba, Tencent, Pinduoduo, Vipshop, and BYD (automotive manufacturing). These companies are listed via ADRs on Western exchanges, democratizing access to the Asian market.

Indirect Participation

Contracts for Difference (CFDs) allow speculation on Asian market assets without acquiring actual ownership, operating on specialized platforms. This mode reduces administrative friction and broadens the spectrum of accessible assets in the Asian market.

Summary: Continuous Vigilance of the Asian Market

The compass for navigating the Asian market during 2024 should be oriented toward monetary, fiscal, and regulatory policy announcements. Demographic transformations, geopolitical repositioning, and the reorientation of global supply chains toward Vietnam, Indonesia, and India are long-term dynamics shaping the Asian market.

The key is to maintain constant observation of the Asian market, as inflection points are often anticipated in public policy statements. The accumulated depreciations in the Asian market may be laying the groundwork for unprecedented opportunities for investors with a long-term horizon and the capacity to withstand volatility.