Which Asian Markets Should be on Your Radar?

Asian markets performed remarkably well in 2017, paying dividends (pun intended) to investors who purchased securities. This was a result of high levels of growth in GDP and development of policies that promote business.

The potential trade wars between China and the US have already taken their toll on the Asian markets as the Nikkei; the Topix and the Kospi all dropped significantly following investors bear run in the markets. This was the result of the increasing apprehension of a potential trade war between the US and China. The fears of the trade followed Trump’s (President of the US) aggressive tax policies on Chinese goods.  The president asked his officials to investigate the possibility of increasing trade tariffs on up to $US150 billion of Chinese goods. The two countries make up the world’s two largest economies. Investors are then cautious of the effects such an event could have on stock markets. This is especially true for investors who engage in international share trading.

With that in mind, here are the markets to keep in mind this year for anyone keen on international stock trading. Furthermore, be sure to hire a reliable stock broker for international trading to benefit from these markets.

China

The Chinese government has forecast a 6.5% growth in its GDP for 2018, making it ripe for economic growth. This is a slight dip from its growth of 6.7% in 2017 as policymakers try to shift their sights on deleveraging (the process of reducing one’s debt levels) and systemic risk control. With debt levels making up to about 47% of China’s GDP in 2017, China’s financial integrity may be at risk.

However, some analysts predict China’s growth rate to be slightly lower at 6.25% and with the recent proclamation by the US to increase levies on Chinese goods; the GDP may actually grow at a lower rate.

Further, China may address the moral hazard that plagues banks. Moral hazard is the risk that a party to a transaction may begin to act differently after the transaction takes place. A classic example of this is customers of insurance companies. Before insurance companies came up with policies that protect them from deviant users, insurance companies faced the risk of moral hazard. Typically, once people obtained an insurance cover, they began acting less carefully as they knew they would be covered by insurance if anything were to happen.

For these reasons, investors are expected to remain neutral on Chinese markets.

Indonesia

Bank Indonesia has strived to stabilise the economy. The institution has been building considerable foreign reserves as well as striving to reduce the current account deficit. Headline inflation has seen decreased from 8% to 4% and now within the target range specified by Bank Indonesia. The government has specified a target GDP growth rate of 6%. This promises for strong economic performance in 2018.

However, there are some key aspects to take into consideration for Indonesia in 2018. The provincial elections in the first half of 2018 as well as the presidential elections in 2019 may lead to policies that may reduce investor confidence in the market. Furthermore, a considerable drop in oil prices may pose a risk to the country’s fiscal forecasts for 2018.

We remain optimistic in this market for the year.

South Korea

South Korea has recently improved its short-term borrowing in relation to its total debt in addition to being rated investment grade. Political tensions have been high between North Korea and South Korea. However, Kim Yo Jong, sister to North Korean leader Kim Jong Un, visited South Korea for the opening ceremony of the winter Olympics. Though not a definite confirmation of diplomacy between the two sides, it restored investor confidence in the South Korean markets. Thus, we remain slightly optimistic in this market for the year.

Bottom Line

In general, with most of the risk being controllable, we expect the Asian markets to continue offering attractive investment prospects for the year.

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