We see plenty of reasons for investors to be positive on the outlook for Asian equities in 2022, now that peak coronavirus appears to have passed and the region’s economies are reopening.

Progress in the rollout of vaccines, allied to improved anti-viral treatments, point to a policy transition from "zero-Covid" tolerance to one of endemic coronavirus management.

It’s early days in our understanding of the Omicron variant’s transmissibility, virulence and ability to resist vaccines. We recall initial concerns that the Delta variant would weaken vaccine efficacy substantially, although in practice those effects proved very modest.

Most policy interventions have been light touch, including international travel restrictions, selective mask mandates and accelerated booster campaigns. Singapore and Australia both put off plans to admit vaccinated visitors, and Japan shut its border to non-resident travelers.

Although we’re monitoring events closely, for now we’re not adjusting our base case for growth, inflation or policy, given the high degree of uncertainty. Global alertness to coronavirus variants raises our hopes about an eventual easing of mobility restrictions and resumption of travel. As that happens, we would expect Asian exports to pick up, as demand grows in the US and Europe. That said, economists in our Research Institute acknowledge that risks to our base case have increased.

A key question globally concerns how transitory inflation really is, and we don’t have a crystal ball. But unlike Western markets, we haven’t seen much price pressure in Asia so far.

Investors should feel reassured that Asian central banks have more headroom to adjust monetary settings, having been more conservative with state policy tools in recent years.

The Bank of Korea has signaled a potential interest-rate hike soon, but Asian policymakers on the whole continue to prioritize economic support. Asian balance sheets are also in a healthy state, with many companies either meeting or exceeding earnings expectations in recent results.

Economic reopening will help to mitigate inflationary pressures tied to near-term bottlenecks in supply chains. This is an area that we continue to monitor closely. We urge investors to diversify across markets and sectors, and focus on firms with pricing power that can pass on cost pressures to protect their margins. We see many quality businesses doing exactly that.

While Asia experienced an equity market rally in the first half of 2021, a regulatory reset in China and the prospect of US tapering led to a correction. Still, corporate Asia is well placed to withstand a cycle of a stronger dollar overall.

We expect China’s property sector to remain under pressure. Meanwhile China’s zero-Covid policy approach is likely to stay in place until at least after it hosts the winter Olympics (set for February 2022). Again, investors can rest assured that Beijing has levers to pull if economic conditions become less stable. Bear in mind, much of China’s growth slowdown is self-imposed, via restrictions in property and energy sectors, and the common prosperity push.

Investors may wish to be selective. But if they look carefully they can find quality Chinese businesses on the right side of the policy agenda that are delivering strong growth. Structural drivers behind consumer spending in China remain intact. We predict rising disposable incomes and increasingly health-conscious citizens will drive demand for healthcare products and services. Growth in domestic consumption remains a strategic priority for Chinese authorities, so we view quality consumer stocks as well placed to withstand regulatory headwinds.

We believe Southeast Asia will be the biggest beneficiary of economic reopening. Hit hard by Covid, Indonesia and Vietnam are just emerging from the pandemic. They’re working through supply-chain indigestion, with cyclical stocks long overdue a meaningful rebound.

India’s stock market has been taking a breather of late, having rallied hard in 2021. But we’re confident there’s plenty of market upside to come given favorable demographics, low mortgage rates, rising household incomes and improving housing affordability.

After years of subdued economic growth, India looks primed for a rebound that should feed through to earnings. A brightening picture is boosting sentiment and company spending plans. There’s also excitement around India’s tech sector. The nation has produced 100 unicorns and counting.1 Many are listing on exchanges, transforming the corporate landscape.

Foreign direct investment continues to flow into the tech sector. As these businesses grow and harness new technologies, they will invest — creating jobs and lifting incomes. Consumers may benefit from better products and services.

India’s government, too, is reforming the business environment, attracting foreign investment, incentivizing companies via tax benefits, and raising spending on key infrastructure projects. We expect a broadening of India’s entire tech ecosystem, driving more growth in digitization.

In terms of valuations, Asian stocks look reasonable, relative to developed markets. The 12-month forward price-earnings ratio for the MSCI AC Asia Pacific ex Japan Index stands at 15.6x, compared with 22.5x for the S&P500, 16.2x for MSCI Europe and 20.3x for MSCI World.2 Consensus earnings growth for Asia Pacific ex Japan markets is forecasted to be in double digits for 2022.

We believe Asia’s burgeoning middle class will fuel rising demand for healthcare services and wealth management, while the region’s urbanization and infrastructure needs remain vast. At the same time, changes brought about by the pandemic could prove durable and reinforce existing trends – such as increased adoption of cloud computing and 5G networks.

Policymakers globally are also committing to a lower-carbon future and Asia is at the forefront of change. Investors can anticipate tailwinds for companies operating in renewable energy, batteries, electric vehicles, related infrastructure, and environmental management.

As investors, we focus on quality firms with strong balance sheets and sustainable earnings prospects, that we believe are best placed to capitalize on structural growth opportunities in the region. We see market corrections as a potential opportunity for long-term investment. In Asia, investors need to think long term. But Asia’s attractions are still as bright as ever.


  1. Credit Suisse Equity Research, March 2021.
  2. Bloomberg, 18 November 2021.