Markets across Asia have been beaten down this year with China and Greater China suffering because of both internal and external challenges. Of course the external challenge has been the threats from President Donald Trump on trade. The Shenzhen Composite has fallen approximately 30 percent this year while the Shanghai Composite fell more than 20 percent. Kospi, the South Korean market has pulled back almost 17 percent and Hang Seng, the Hong Kong market faded by 15 percent. Japan, the Nikkei 225 faded a more respectable 10 percent for the year. Surely there will be those looking to pick up names that have been oversold in the past two months. The US markets have been punished with some major indices trading down by 18 to 20 percent. The 20 percent mark is officially a bear market but we think that 25 to 30 percent on is a possible range – look for more downside next week.
The strength of the US dollar has contributed to the weakness in Asian markets this year. This is because investors who were looking at the robust US economy and the potential for better returns in the US market moved their money into the US. However, there is a view that the US might not hike rates as quickly as thought, because of slower growth and this would have some impact in the US dollar. Another reason is the US faces both fiscal and current account deficits. The fiscal deficit is one in which the US government spends more than it takes in on taxes, so it is in the red. The current account deficit is one in wich the US imports more than it exports. Both of these deficits are likely to add downward pressure on the US dollar. So the dollar could trade heavy next year.
One fund manager in CNBC, a JP Morgan voice, liked the idea of buying stocks for a long-term play.
The US does have a 90-day truce with the Chinese government on trade. However, this could mean that the pain is only prolonged and that the trade war will intensify in 2019. Asian companies are likely to see solid earnings in 2019 so some experts are recommending to buy, especially given the massive sell-off mentioned above. For 2019, there is a positive outlook for stocks in Asia and long-term investors have already started to buy.