Stocks in Asia are heading for their best month in 24 years

NOVEMBER is turning out to be the best month for Asia stocks in 24 years.

The MSCI Asia Pacific Index jumped nearly 14% this month, set for its best performance since 1998, with the rebound outpacing other benchmarks globally. Gauges from Hong Kong to the Philippines are seeing strong gains with records that held for at least a decade cracking.

The surge has been driven by growing signs that China is easing its Covid-Zero policy, and expectations that the US Federal Reserve will move toward a slower pace of rate hikes. Asset managers are arguing this is only the start, making the case for the outperformance to continue into 2023.

“Relative to other EMs, we have much stronger balance sheets at sovereign and corporate levels, more prudent policymaking, and positive structural reforms in a few key countries,” Peter Monson, portfolio manager at Nikko Asset Management, said in an interview.

Foreign funds bought US$12.6 billion worth of shares on a net basis in emerging Asia excluding China this month, the biggest inflows in two years, according to data compiled by Bloomberg.

Taiwan accounted for nearly half of the flows, as foreign investors including Warren Buffett bet on chipmakers amid easing tensions between China and the US.

Traders also piled back into Chinese assets, spurred first by rumours spread early this month over a Covid-Zero exit plan, and then as the authorities introduced measures underlining an intent to relax restrictions. A slew of policy aid for the troubled property sector also helped.

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There was a “dramatic change in market sentiment, with policymakers in China unleashing different sets of policy support,” said David Townsend, managing director of EMEA Business at Value Partners Group.

Goldman Sachs Group Inc expects a further stock rally in China and South Korea while Morgan Stanley has touted a 14% increase for the MSCI China Index next year. – Bloomberg / pic TMR File