Asian markets traded mixed on Friday, January 24 as investors digested a series of economic reports from China, which showed robust growth in the fourth quarter of 2024. The country’s economy expanded by 5.4%, surpassing expectations and contributing to a full-year growth rate of 5%, according to China’s National Bureau of Statistics. Key economic indicators from China were particularly encouraging. Retail sales in December jumped 3.7% year-on-year, exceeding the forecast of 3.5%. Industrial output also expanded 6.2% year-on-year, higher than the anticipated 5.4%. This positive economic data was a significant driver of market sentiment across the region and provided a strong tailwind for market performance, especially in markets closely tied to China’s economic health.
Japan’s Nikkei 225, however, ended the day down 0.31% at 38,451.46, while the Topix lost 0.33% to 2,679.42. Despite the positive economic data from China, Japanese markets were influenced by broader global factors and domestic economic concerns. South Korea’s Kospi closed slightly lower, falling 0.16% to 2,523.55, while the tech-focused Kosdaq edged up 0.06% to 724.69.
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In an interview with CNBC on January 15, David Herro, Partner and Portfolio Manager at Harris Associates, discussed the potential opportunities in international markets. Herro noted that while U.S. stocks have been the center of attention and have seen significant gains over the past decade, international equities, offer attractive investment opportunities due to their undervalued nature and growth potential.
Herro emphasized that the valuation differential between U.S. and international stocks has become quite large, creating pockets of opportunity for investors. Many international stocks are trading at attractive multiples, with earnings ratios of about 10 times, and these valuations are based on projected earnings growth of around 10%. This combination of low multiples and reasonable growth expectations makes international equities almost irresistible for investors.
Herro pointed out that the growth rates of international companies are not solely dependent on their home markets but are influenced by their global operations. For instance, many Asian companies, particularly in sectors such as technology, manufacturing, and consumer goods, have a significant presence in global markets. This global diversification can provide robust growth opportunities, even in the face of local economic challenges. He also highlighted the importance of considering the fundamentals of individual companies rather than just the macroeconomic conditions of their home countries. Many companies, despite operating in regions with varying economic conditions, have strong business models and are positioned to benefit from global trends such as digitalization, urbanization, and rising consumer spending.
As investors seek opportunities beyond the U.S., Asian markets stand out as promising destinations for long-term growth. With that in context, let’s take a look at the 10 best Asian stocks to invest in according to analysts.
A business person overlooking a graph depicting the FTSE Developed Asia Pacific All Cap Index.
Our Methodology
To compile our list of the 10 best Asian stocks to invest in according to analysts, we used Finviz and Yahoo stock screeners to identify the 30 largest Asian companies. From that list, we narrowed our choices to the 10 companies that analysts see the most upside to. We also included their stock price as of January 27 and their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential as of January 27.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Asian Stocks to Invest in According to Analysts
10. Yum China Holdings, Inc. (NYSE:YUMC)
Upside Potential: 27.81%
Stock Price as of January 27: $45.24
Number of Hedge Fund Holdings: 30
Yum China Holdings, Inc. (NYSE:YUMC) is a leading restaurant operator in China and manages popular brands such as KFC, Pizza Hut, and Taco Bell. The company operates 15,000 restaurants in over 2,100 cities and towns. Yum China Holdings, Inc. (NYSE:YUMC) adapts its menu to cater to local tastes while maintaining global standards.
Yum China Holdings, Inc. (NYSE:YUMC) is implementing a dual strategy of operational efficiency and innovation to drive sustainable growth. The company has launched initiatives such as Project Fresh Eye and Project Red Eye to streamline operations and reduce costs. Project Fresh Eye focuses on simplifying and automating key processes to ease the burden on restaurant managers, allowing them to focus more on customer service. Project Red Eye, on the other hand, aims to optimize spending and procurement and is generating savings that are then reinvested in food innovation and value-for-money offers. These initiatives have led to significant improvements in restaurant margins and operating profit margins.
Furthermore, Yum China Holdings, Inc. (NYSE:YUMC) has adjusted delivery fees and introduced more entry-price offerings to attract value-conscious customers, particularly solo diners. The company has also enhanced its presence on aggregator platforms and expanded delivery coverage.
9. ASE Technology Holding Co., Ltd. (NYSE:ASX)
Upside Potential: 27.95%
Stock Price as of January 27: $9.73
Number of Hedge Fund Holdings: 12
ASE Technology Holding Co., Ltd. (NYSE:ASX) is a Taiwan-based global leader in semiconductor packaging and testing. The company provides advanced electronics manufacturing services to some of the world’s leading technology firms in the computing, telecommunications, and automotive industries. ASE Technology Holding Co., Ltd.’s (NYSE:ASX) expertise lies in offering cutting-edge solutions such as chip-on-chip packaging, system-in-package, and wafer-level packaging.
ASE Technology Holding Co., Ltd. (NYSE:ASX) is investing heavily in building new capacity and upgrading its existing facilities to meet the increasing demand for advanced chip-on-chip packaging services. The company is also strengthening its partnerships with major semiconductor companies, including foundries and fabless companies, to secure new business opportunities and expand its customer base. Additionally, ASE Technology Holding Co., Ltd. (NYSE:ASX) is developing new technologies and capabilities, such as 2.5D and 3D packaging, to enhance its competitiveness and provide more value-added services to its customers.
Another key area of focus for ASE Technology Holding Co., Ltd. (NYSE:ASX) is its test business, which is expected to play a crucial role in the company’s growth strategy. The company is investing in new test technologies and capabilities, such as wafer sort and final test, to expand its test services and increase its market share. The company is also developing its turnkey business model, which provides customers with a comprehensive range of services from design to manufacturing, to increase its revenue and profitability. Furthermore, ASE Technology Holding Co., Ltd. (NYSE:ASX) is exploring new opportunities in emerging markets, such as artificial intelligence (AI), high-performance computing (HPC), and the Internet of Things (IoT), to diversify its revenue streams and reduce its dependence on traditional markets.