Gains in the Indian market are mainly on the back of continued strong economic momentum.
Strong capital flows to “safe havens” caused marked declines in valuations in northern Asian markets, such as South Korea, Taiwan, and China in 2022. The average drop in these markets was around 20 percent, a trend that has now been partially reversed. These markets may make a comeback when the macroeconomic environment and investor sentiment improves.
India, Indonesia, and China – three of the four most populous economies on earth with more than three billion inhabitants in total – could each see GDP grow by 5-6 percent in 2023. The developed economies of South Korea and Japan may also grow more rapidly than those of most other developed markets.
The risks to growth in Asia in 2023 emanate primarily from increasing geopolitical tensions, especially in the Pacific, a potential reigniting of the Chinese real estate crisis, and from delays in rolling back the strict Covid-19 containment measures in China.
India is currently expanding its manufacturing sector on a massive scale and launched a major infrastructure investment programme in early 2022 to encourage foreign company offshoots whereas the Japanese government is banking on comprehensive financial support to alleviate the energy crisis for its domestic businesses.
For 2023, it said that stocks remain an essential component of a diversified portfolio. Decent overall price gains are expected in 2023, but with periods of perhaps substantial volatility.
Revaluation for stock markets following the recent large interest rate hikes has now more or less ended. A high valuation phase due to very low-interest rates has been followed by a low valuation phase, and the stock markets are currently transitioning to a medium valuation phase for the years ahead. While this is no indication that 2023 will be a great year for stocks, it expects solid price increases in the single-digit percentage range.
Extensive fiscal programmes and high levels of savings should buoy private consumption and expected stronger Chinese growth will be important to many European companies. The U.S. stock market will of course remain the focus, but its technology bias, and the resulting greater sensitivity to interest rate movements, may lead to greater investment risks, as could the expected weakening in the USD.
Weak economic momentum is expected to continue into early 2023, predicted DB. Both Europe and the U.S. are caught between a restrictive monetary policy that curbs both inflation and the economy and an expansive fiscal policy aimed at bolstering the economy and cushioning the effects of the current energy crisis, among other things.
If inflation rates continue to decline and there is no need for robust Fed intervention, the U.S. economy could return to growth in the second half of 2023, finishing the year overall at +0.4 percent.