Asia’s History of Strong Decembers Holds Promise for Investors
A man walks past a screen displaying the closing the closing figure of the Hang Seng Index at the Hong Kong Exchanges and Clearing Ltd. building in Hong Kong, China. (Photographer: Justin Chin/Bloomberg)

Asia’s History of Strong Decembers Holds Promise for Investors

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Investors looking to finish the year off strong should turn their attention to Asia equity markets in December, if history is any guide.

The MSCI Asia Pacific Index, which has just posted its best monthly return since 2009 with a 10.2% rally in November, may remain robust in December, based on its track record over the past decade. Since 2010, the benchmark gauge has averaged a 1% gain in the final month of the year, double the performance of the S&P 500 in December, according to data compiled by Bloomberg.

MarketDecember trailing 10-year average return
MSCI Asia Pacific Index+1%
CSI 300 Index+3.3%
Taiex Index+1.9%
Topix Index+1.1%
Kospi Index+0.8%
Hang Seng Index+0.5%
S&P 500 Index+0.5%

Source: Bloomberg

News on development of vaccines to prevent the spread of Covid-19 has fueled optimism for a global economic recovery and sparked a significant value rotation in Asia back into cyclical stocks over the past month.

While a worrying fresh wave of infections is spreading across much of the world, vaccine distribution may begin sooner than previously expected. U.S. government officials are promising a rapid rollout to millions of Americans by the end of the year, while the U.K. is poised to become the first country to approve Pfizer Inc. and BioNTech SE’s vaccine.

In Asia, China and Taiwan -- showing some of the healthiest signs of economic growth in the region -- are also positioned for the strongest equity performance this month, based on recent history.

China’s Shanghai Shenzhen CSI 300 Index has averaged a 3.3% advance in December over the past 10 years, while Taiwan’s Taiex Index has returned almost 2%, both well ahead of other major peers in the region including Hong Kong, Japan and Korea.

China’s official gauge of manufacturing sector activity rose faster than expected in November, the latest sign of its economic recovery. Taiwan raised its forecast for growth this year on stronger-than-expected international demand for technology products.

When it comes to Asia stocks, one shouldn’t ignore the growth and “technological megatrends” even as global investors have started to focus on value stocks after a stream of positive vaccine news, Manishi Raychaudhuri, head of Asia Pacific equity research with BNP Paribas SA, said in a Nov. 26 report.

Raychaudhuri recommends investors maintain a balanced approach, with his Asia model portfolio consisting of a slight majority mix of technology, media and telecom stocks alongside consumer discretionary, as well as value exposure to financials, property, energy, materials and industrials.

©2020 Bloomberg L.P.

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