A shift in global investment is seeing Asia eclipse the US in returns. While the S&P 500 has dipped by 0.14 per cent this year, the MSCI World Index (excluding the US) has jumped 7.14 per cent. Bank of America strategists suggest this signals an end to American exceptionalism and the start of global rebalancing, with Asia at the forefront.
Bloomberg’s Asia Pacific market index has surged 11 per cent this year, propelled by strong performances in Japan, Taiwan, Korea and Thailand. Over the past year, the Nikkei has climbed 44 per cent, Taiwan’s market is up over 40 per cent and Korea’s is up 100 per cent. Shanghai has gained more than 21 per cent and smaller markets like Vietnam are up by more than 40 per cent.
Strategists attribute this rebalancing to factors like US economic policy risking inflation and the increasing demand for commodities driven by artificial intelligence. According to a Bank of America fund manager survey, fund managers are now net 49 per cent overweight in emerging markets, the highest since February 2021.
While some analysts, like Nick Ferres, chief investment officer of macro fund Vantage Point Asset Management, caution about potential risks in markets driven by computer memory stocks, others highlight opportunities in markets like Vietnam. Vantage Point is a macro fund and founding member of Vietnam’s new International Financial Centre initiative. Ferres notes that Vietnam’s market offers reasonable value, trades at nine times earnings, and is forecast to deliver 25 per cent compound earnings growth over the next five years, supported by strong GDP growth and market reforms.
