Insights

We discuss how a bullish year for Japan equities has brought what was previously out of sight into view and analyse focal points for the market as we head into 2024; we also assess how focusing on efficiency and growth could be the way forward for Japan given its projected drop in the GDP rankings.

Our investment themes for 2024 focus on key features of a world in transition. They include higher-for-longer rates, production shortages in natural resources and the search for new sources of productivity. Transitions are never easy, and features of the old world accustomed to low rates may not make it. We believe that some of these old-world features could pose systemic risks as “creative destruction” does not always run smoothly.

We are heading into a changing world, where the more recent past can no longer be relied on to guide our path forward. But we are not blindfolded. There are tools we can use to provide a greater degree of certainty. Our Future Quality approach is designed to help us identify franchises that are set to endure.

We present our 2024 outlook for sustainable fixed income, core markets and credit markets.

We expect 2024 to be a year of domestic consolidation and long-term reform measures, where markets are driven more by Japan-specific events than by global factors. After decades of deflation, we see Japan as finally breaking out of this cycle in 2024, as it enters a virtuous cycle of price increases and wage hikes.

We believe ASEAN will offer good pockets of growth and quality opportunities, as well as earnings resilience and protection amid some of the prevailing global macro headwinds.

We believe that our “New Singapore” narrative focusing on sectors and companies that represent the future of the city-state will remain relevant in 2024. Energy transition has risen to prominence within the New Singapore narrative in addition to data, technology, healthcare, logistics, tourism and food solutions.

Considering that major tech companies are profitable, cash rich and cannot afford to lose out in the highly competitive AI race, spending on high-end computing and neural networks looks set to continue in 2024. This will likely create a lasting boon to many component suppliers (the so-called picks and shovels of AI) across Asia.

Much like this report in 2023, global conditions will remain unique and defy a confident overall summary; thus, here are ten predictions on some particularly noteworthy factors.

We expect 2024 to be a year of higher returns and lower volatility for Asian local government bonds as US Treasury yields are seen stabilising. We also see Asian currencies firming against the dollar in 2024 as the Federal Reserve’s rate hike cycle comes to an end.