Schroder: China's active promotion of economic growth combined with the prospect of moderate rate cuts in the United States is driving positive investment prospects in Asia.

Schroders global, Director of Diversified Asset Investments, Sharon Shin, stated in a post that looking ahead, Schroders global remains optimistic about the overall fundamentals of the Asian bond market, especially as lower-quality enterprises have been removed from the bond index, particularly high-yield real estate companies. In addition, recent fiscal stimulus measures introduced by mainland China and the downward trend in US benchmark interest rates both support the Asian bond market. Sharon Shin said that as Asia fully recovers from the COVID-19 pandemic, the region will continue to drive global economic growth in 2024, and she believes this growth momentum will continue into 2025. Additionally, China's active promotion of economic growth, along with the mild prospect of interest rate cuts in the US and the weak performance of the US dollar, is expected to further support central banks in the region to ease monetary policies. These global macroeconomic factors will help in the flow of funds into the Asian financial markets, creating a favorable investment environment for stocks and bonds in the region. Regarding the stock market, companies with clear profit prospects and stable cash flow are expected to be a major driver of returns in the Asian market. Currently, many high-quality companies also offer attractive dividends to enhance defensiveness in uncertain market conditions. Furthermore, three major investment themes will continue to play a key role in the Asian market in the remaining time of 2024 and in 2025, namely artificial intelligence (AI) and the broader information technology (IT) industry, corporate governance reform, and attractive Asian credit market yields. Artificial intelligence and information technology: The IT industry in Asia benefits from cyclical recovery and optimistic expectations for AI. As user demand stabilizes gradually after the COVID-19 pandemic, most inventories have returned to pre-pandemic levels. Schroders global believes these factors lay a solid foundation for the recovery of various areas of the IT supply chain, including semiconductors and technology hardware, in 2025. Corporate governance reform: The Tokyo Stock Exchange (TSE) calls for companies to focus on achieving sustainable growth and enhancing company value. Influenced by this, Japanese companies have implemented more robust corporate governance and more efficient fund allocation measures, resulting in significant returns in the Japanese market. These reforms have also extended to other Asian markets, including South Korea and China. These two markets have respectively introduced their "Enterprise Value Enhancement Plan" and a new set of "Nine Measures" guidelines aimed at improving market accessibility and strengthening investor protection, with these measures expected to have a profound and lasting impact on the financial markets of both regions. Attractive Asian credit yield rates: The Asian credit market, especially investment-grade credit, features attractive risk-return characteristics. During the current rate-cutting cycle, credits issued by Australian and Japanese financial companies are expected to continue performing well due to improvements in credit fundamentals. Similarly, sectors with relatively attractive overall income, such as the Macau gaming industry and the renewable energy sector in India, are expected to continue to perform strongly. Sharon Shin stated that policymakers in mainland China recently rolled out the largest monetary and liquidity stimulus package since the COVID-19 pandemic. Subsequently, at the meeting of the Standing Committee of the National People's Congress in November, a 1 trillion yuan debt swap plan was announced to ease financing pressures on local governments. Schroders global believes that the Chinese central government may retain more "ammunition" in response to future uncertainties and challenges brought by the newly elected US president. The authorities still have multiple opportunities to introduce new measures at the Central Economic Work Conference and the National People's Congress in December. By then, one may see the authorities setting out fiscal policy strategies for 2025, especially in areas such as housing supply, infrastructure investment, and consumption. Considering the relatively relaxed regulatory environment and reasonable policy support expectations, Schroders global believes that the mainland Chinese financial markets may exhibit resilience in the short term and benefit from continued retail investment. If more robust fiscal stimulus measures are implemented in the coming months to stabilize the real estate market and boost market sentiment, or if significant improvements are seen in the profit prospects of mainland Chinese companies, especially in non-essential consumer industries, this trend is expected to continue into 2025. While monitoring the actual economic results, Schroders global continues to favor strategic focus industries in mainland China, including advanced technology, new materials, electric vehicles, renewable energy, and enterprises with efficient business models such as high-quality state-owned financial enterprises and mainland Chinese internet platforms and technology companies. Both industries recorded robust profits in 2024. Schroders global believes that investors may consider adopting a barbell strategy, diversifying between growth assets and income assets to balance market volatility and enhance overall returns.