2022 Asia Markets: Shaken but not stirred

Beneficiaries of tightening monetary policies

Banks benefit from higher net interest margin in a rising interest environment. In addition, a recovering economy bodes well for loan growth that further amplifies net interest income.

Hang Seng Bank is the main beneficiary of higher interest rates given its high exposure to HKD/USD assets, and is best positioned to capture investment demand in the Greater Bay Area. We also like UOB as a recovery play as its ROE rebounds in line with improving profitability. In our view, there is further room for UOB’s share price to re-rate as we continue to expect economic recovery.

Living with Covid-19

We believe the domestic and international reopening themes will be steadier and more resilient going forward as vaccination rates rise across the region.

With the return of tourists to Hong Kong/Macau, we see stronger sales going forward for Luk Fook and Sa Sa. We also see better days ahead for CDL Hospitality Trusts and SATS as borders reopen and travel resumes.

Sustainability drive and structural changes

ESG continues to grow in importance with renewables being key beneficiaries. Flat Glass Group and Xinjiang Goldwind are poised to benefit from China's pursuit of carbon neutrality. In Singapore, Sembcorp Industries is a leading renewable energy play and should continue to see re-rating of the stock on its green transformation strategy.

Digital transformation will remain in focus as the increased adoption of 5G, IoT, AI, and EVs continues to drive the structural trends in the technology sector. UMS continues to ride on the strong global chip demand, on the back of the acceleration of these technology-driven developments. The recent chip shortage is another shot in the arm for the chip equipment maker.