In a rivalry as old as the continent itself, Asia's major "emerging" markets India and China are set to do battle for investor support in 2013, with the rest of the region likely to take its tone from the outcome.
India faces challenges to deliver short term progress, while China has already implemented measures such as the Special Economic Zones from the East Coast to the West, which will increase urbanisation, improve per capital income and drive consumer spending higher.
Certainly China’s new leadership carries the hopes and expectations of a new generation of investors, both domestically and abroad, on its shoulders. China-watchers have been scrutinising every appearance and statement from the new line-up for clues as to policies, direction and timetable.
Nick Price of the Fidelity Funds Emerging Markets Fund notes: “With the recent appointment of the new Chinese executive committee, and the significant influence that the direction of the Chinese economy has on its trading counterparties, 2013 is likely to be characterised by much focus on the approach adopted by the Chinese government.”
“We hope to see increased acceptance that excess capacity needs to be rationalised in order to improve productivity and long term economic viability within the Chinese industrial sector. Accordingly, any such change of emphasis will have significant ramifications for economies reliant on the export of industrial commodities.
Subdued demand from the developed world, struggling with excessive debt and feeble economic growth, will weigh on those economies reliant on the export of investment goods.
“It is possible that, barring any unforeseen political shocks, reduced investment demand coupled with new capacity coming online may result in downward pressure on commodity prices,” said price. “With much of the emerging world spending a large proportion of their income on food and energy, limited inflationary pressures will be welcomed by many developing economies.
“In this more subdued global environment, we continue to focus our efforts on identifying businesses that can maintain a strong competitive position in their local markets, and which benefit from structurally positive tailwinds such as population growth, rising levels of disposable income, and increasingly sophisticated consumers who aspire to join the world’s middle classes.”
Teera Chanpongsang, Manager of Fidelity Emerging Asia Fund, added: “2013 promises to be an exciting time for Emerging Asia. There are many potential positive catalysts for the region: the outlining of policies from the new China leadership; the impact of India reforms; more ASEAN integration. On top of this we also have elections in Malaysia, further opening up of Frontier markets like Myanmar and continued post-flood reconstruction in Thailand.
“These short-term injections can add additional fuel to the long-term growth drivers in the region…I believe that concerns for economic growth across the region, especially China, are at their lows and, more importantly, companies will continue to grow. This, in turn, will improve investor sentiment towards the region.”