Nomura Investment Forum Asia: Asia equities market outlook

During our virtual Nomura Investment Forum Asia conference this year, our equity strategists explain what the outlook of Asia equities will be in the near future.

Asian markets are still relatively underinvested. Strategic Asset Allocation among pension funds have shifted since the global financial crisis (GFC) in 2008. Interest rates on domestic government bonds are too low for PPFs to meet their pension promises forcing them to look elsewhere for income. There has been a shift into higher risk assets (EQ, alternatives) particularly away from fixed income and greater geographical diversification of PPF portfolio. Asian markets, nevertheless, are still underinvested relative to their respective benchmarks. One important thing to note is that Japan has emerged as the country with the best dividend market in the world, providing the highest dividend growth over the last five years, having grown by 173% in the last ten years.

The global outlook and focus remains on the big 4 economies, namely US, China, Japan and Europe. As the pandemic curve flattens out, lockdowns ease, and economies start to open up, markets have begun to rally. Despite a risk of a second wave of Covid-19, it is unlikely to be as severe as the first. Due to Covid-19 and the impact on GDP, central banks have provided liquidity from monetary policies as well as fiscal and credit support. Our economists also expect a gradual recovery, which bodes well from an equities standpoint.

The shape of earnings is rather unclear at this time, though judging by the aftereffects of the GFC in 2008, we expect them to normalize towards the end of 2021. In our base case, we expect an 11-12% return. However, we continue to be mindful of concerns such as US-China trade frictions and a potential second wave of Covid-19, though to a lesser extent.

Finally, we take a look at India, which has been an underperformer in the last three months. Foreign holdings in Indian equities fell sharply in March, but showed a minor uptick in April 2020. Significant earnings downgrades are seen for FY21, close to GFC levels. Outlook is unfortunately still negative, which is a concern. Any further deterioration could see India downgraded further.

To watch the full presentation, please visit our Nomura Investment Forum Asia website (requires guest login).

For more insights, please read our outlook for 2H20, and our recent article, World after reopening and ideas for Japanese equities.


  • Jim McCafferty

    Joint Head of APAC Equity Research

  • Yunosuke Ikeda

    Japan Equity Strategist

  • Saion Mukherjee

    Head of Equity Research, India

  • CW Chung

    Head of Research, Korea and Pan-Asia Tech / Semiconductors Research

  • Chetan Seth

    Equity Strategist, Southeast Asia

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