Asia's Strongest Performer in 2024 May Surprise You

For Asian shares, we end the year on a bit of a downer. Stocks are drifting south, and we’re all shocked by the plane crash in South Korea, piling personal misery on top of the political chaos there.

But in review, it’s been a very positive year for Asian equities as a whole. That’s reflected in the 14.5% gain in the Asia Dow index.

Japan has again been a star performer. The exporter-heavy blue-chip Nikkei 225 is up 19.9% year-to-date, as of Monday’s close. Tokyo wasn’t trading Tuesday, so the broad-market Topix ended the year on a 17.1% gain.

We’ve had three strong years in a row in Japan. But it comes as some surprise to see that the Hong Kong stock market almost matches the Nikkei’s showing, with the Hang Seng index ending the year on a 19.5% advance.

In fact, if you look at the Chinese stocks listed in Hong Kong – dubbed H-shares – they’ve been Asia’s top performers in 2024. The Hang Seng China Enterprises Index is up 28.5% year-to-date. That’s running slightly ahead of the 23.8% gain that the S&P 500 is showing during my Asian trading day Tuesday, and just shy of the Nasdaq composite’s 29.8% upwards move.

The Hong Kong market closed early today after a half day of trade. Likewise, Australia, New Zealand, the Philippines and Singapore.

Markets in Japan, South Korea, Bangladesh and Thailand are already closed as of Tuesday for an early New Year’s Eve. All those markets will remain closed on January 1, as well as mainland China, Indonesia, Mongolia, Taiwan and Vietnam. There will be basically no trade in Asia.

It’s a time to reflect on the year gone by in Asian equities. There’s been serial disappointment with the degree of stimulus that the Chinese government has agreed to introduce. But Chinese stocks have held on to around half the soar-away gains they produced in late September, after Beijing pledged to add fiscal spending to easier monetary policy in a bid to turn the moribund Chinese economy, still the world’s second-largest of course, around.

I asked in late September whether this was the Big Beijing Bazooka. It was not.

China is a command economy. But time and again, the Beijing bigwigs have demonstrated that they think the Chinese Communist Party is the train of the economy, rather than the conductor. They have mistakenly attempted to order growth into being, or bring it about by tweaking and changing the rules. It demonstrates a lack of faith in the private sector, the actual train, which doesn’t speed up simply because you switch it onto a different track.

The initial euphoria that Beijing would come to the rescue saw the Hang Seng China Enterprises Index shoot up 39.3% in less than a month, between September 11 and October 7. The Communist Party meetings that ensued were generally lackluster and lacking in detail – we often heard at one meeting that another important meeting would be coming right up – although they did make mortgage rules more forgiving and financing easier to secure. But there was no injection of cold hard cash into the Chinese economy, and the property industry continues to suffer a total loss of confidence.

Still, as we enter 2025, Chinese stocks at least had a better year in 2024 than the disappointing three years that preceded. That China Enterprises index remains 21.9% higher at the end of the year than when the runup began.

It appears the Hong Kong and mainland stock markets have at least arrested their tailspin, and enter next year on a surer footing. Market conditions couldn’t get much worse, with Hong Kong often the world’s worst-performing major market prior to 2024.

Great Year for Singapore's Straits Times

Outside China and Japan, it was a solid year for Singapore stocks. The Straits Times index arrested an early August slump and reclaimed all its lost ground, and more, ending the year on a 16.9% advance. That was its best showing since 2017, buoyed by transportation and banking stocks.

But the performance of Southeast Asian markets was erratic. Malaysia performed next-best, up 13.1%. But stocks in the Philippines only edged into the black for the year, with the PSEi composite index up 0.8% in 2024. And there were losses in Thailand, with the SET index down 1.1% for the year, and in Indonesia, with the IDX Composite index in Jakarta down 2.6% in 2024.

In Australia, the S&P/ASX 200 posted a 7.0% gain for 2024, similar to the performance in New Zealand, where the S&P/NZX All Index added 7.8% this year.

It is South Korea that has been the worst-performing major Asian index this year. The Kospi ends 2024 down 10.1% on the year.

Mostly that is a product of the shocking decline in index heavyweight Samsung Electronics (KR:005930), the largest listing in Seoul. Investors have punished it for its overreliance on cheap DRAM chips, where there’s a glut of supply, mainly due to a slowdown in smartphone sales. It has also been slow to move into production of the high-bandwidth memory chips necessary for data servers and to power Artificial Intelligence.

Samsung ends the year down 33.2%, all of the losses coming in the second half of the year. In fact, after better-than-expected second-quarter earnings in early July, Samsung shares were 10.3% higher than where they began 2024.

As I noted in my last column, the political turmoil that has led to both the president and his interim replacement being impeached hasn’t helped. But mostly Samsung’s suffering seems to be a company-specific issue, with shares of rival SK Hynix (KR:000660) up 22.1% in 2024.

My stock pick in Asia for 2024 was Taiwan Semiconductor Manufacturing Co. TSM (TW:2330). It had an exceptional year, up 81.3% at the end of the year. And I’ve said I would pick it again for next year as an individual Asian equity. My other choice for 2025, as I said in my column looking ahead to next year, would be a broad-market exchange-traded fund tracking India.

Now is not quite the time to buy in. I will be watching to see if the current slump in Indian equities ends. The Nifty 50 ends 2024 up 8.8%, but having slid 9.8% since late September. Likewise, the Sensex added 8.2%, but has fallen 9.0% since September 26.

There have been outflows out of India from foreign institutional investors, with inflation running at 5.5% and once again a concern. Still, once this downturn ends, I would favor ETFs based on a smart index such as the WisdomTree India Earnings Fund EPI, the Columbia India Consumer ETF INCO, or the VanEck India Growth Leaders ETF GLIN.

Long term, India is the fastest-growing major economy, with the 6.8% rate for this year likely to ease slightly in 2025. But growth will continue just shy of 7.0% through the end of the decade. S&P Global predicts that will be strong enough to propel India to the world’s third-largest economy by fiscal 2030-31.

There’s been plenty of talk about the exceptionalism of U.S. markets. Frankly, that worries me heading into 2025.

There are no bears among the major investment banks heading into next year, according to their forecasts of the S&P 500. Those range from UBS setting a year-end target of 6,400 (up 8.3% from current levels), to Oppenheimer anticipating a 7,100 close (up 20.2% from today) come the end of 2025.

We shall see. It’s when all the calls are one way that we seem to get the biggest shocks. For Asia, we will be watching to see if China’s stimulus does finally produce an effect, whether Japan’s exporters continue to reap the benefits of a cheap yen, and if Indian equities can regain their mojo in 2025.