Investment bulletin weekly week 40 final

Rising yields create greater dispersion across markets ___________ Vis Nayar Chief Investment Officer Eastspring Investments The global rise in benchmark government bond yields of the past month has increased return dispersion across Asian equity markets. Our preferred themes of Artificial Intelligence (AI) - related tech hardware – heavily concentrated in Ray Farris Korea, Taiwan, and Japan equities – have not just held up but have outperformed Chief Economist US equities. Corporate reform also continues to help Japanese equities. Eastspring Investments

North Asia equities continue to outperform Viola Wang Economist Eastspring Investments

In contrast, rising yields have forced further derating in markets with lower earnings growth. North Asia currently stands out for its combination of high earnings growth and continuing robust earnings upgrades.

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Markets continue to skew towards strong earnings revisions

Despite this, our bias is to continue to discover high growth opportunities in the rest of Asia, “babies thrown out with the bathwater” so to speak. Better than expected growth in developed markets, as proxied in the chart below by the US and European Purchasing Managers’ Indexes, continues to support rapid Asian export growth.

The global demand backdrop is positive for Asian growth

The strength of Asian exports is increasingly spilling over into domestic investment growth and household income growth in most of the region. The chart below shows that in Q3, Asian PMIs improved relative to their cyclical 3-year history in almost all Asian economies.