25 November 2020

2021 Asia Multi-Asset Outlook: A Recovery Cleared for Takeoff

The Covid-19 pandemic set the tone for investor sentiment in Asia over the past year and is likely to remain a key driver in 2021, with recent developments pointing to a brightening outlook. Major economies in Asia have had better success in containing the virus than the West, helping drive the region’s economy toward a relatively faster recovery. In addition, the high efficacy rates shown in recent vaccine trial results have raised hopes that a vaccine could come sooner rather than later.

Meanwhile, the new US administration is expected to take a more multilateral posture and lower the temperature of Washington’s recent volatile relations with Beijing. While concerns about China will not go away, US policy toward China will likely be more predictable. As a seasoned politician with extensive foreign policy experience, Biden is about engagement and multilateralism, which will likely guide his strategy toward China. We think this will be moderately positive for Asian markets.

Boosting intra-regional trade will add to growth

In an environment where multilateralism, globalization, and global growth have been losing momentum, Asia-Pacific nations moved to temper the trend by creating a new free trade pact with China as its core. The 10 members of the Association of Southeast Asian Nations (ASEAN), along with China, Japan, South Korea, Australia, and New Zealand, signed the Regional Comprehensive Economic Partnership (RCEP) agreement in November. This partnership accounts for 30% of the global economy and brings the region a step closer to becoming a trading zone like the EU.1

Some economists expect the RCEP is to add an estimated US$500 billion to world trade and $200 billion to the global economy by 2030. It is also expected to add about 0.2% to its members’ GDP.2 While that amount may be small, it is welcomed at a time when growth is slowing. The deal may not be as rigorous as other trade deals, but it incentivizes supply chains across the region and was designed with political sensitivities in mind. It also avoids more controversial trade issues, like e-commerce and agriculture, that could complicate implementation.

Asian equity and credit opportunities

China’s recovery phase is decidedly on solid footing. This provides a much-needed upward pull to the global economy as the US and Europe slow amid resurgences of Covid-19. We believe China will continue its supportive stance on credit expansion through its political cycle peak in 2022, when the Communist Party holds its 20th national congress.

In equities, we see Chinese and South Korean equity markets as among the most attractive globally in the intermediate term. South Korea tends to have a strong beta to global growth, and therefore should benefit from the start of a multi-year recovery. In addition, it will be in a better position to stimulate growth through fiscal policy and even quantitative easing without suffering a collapse in confidence. Korea and Taiwan are two economies that stand to benefit from competitive strengths in the new-economy sectors (i.e., 5G and other technologies).

In Japan, 2021 will be an interesting year, with new Prime Minister Yoshihide Suga at the helm. A critical question is whether the new administration will pursue reforms. Suga’s focus seems to be more on boosting productivity through further digitalization and software. Such reforms would yield renewed growth prospects for Japan.

As for India and Indonesia, both nations continue to face fiscal constraints amid the Covid-19 crisis. Therefore, the passage of reforms will be critical in supporting growth going forward.

With Asia’s sturdier hand in dealing with the virus and the strongest economic prospects heading into 2021, we think Asian investment grade credit may also provide some of the best risk-adjusted returns going forward. Non-backstopped credits in many emerging market countries (like those in Asia) remain attractive, and interest rates above local inflation can still be found in many emerging markets more generally.

Poised for liftoff

Overall, we see a sustainable recovery taking shape in Asia, barring any significant backsliding on the Covid-19 and geopolitical fronts. Many Asian countries have managed to control the spread of Covid-19, allowing growth to reaccelerate faster than their developed market counterparts. With the roadblocks to confidence and growth falling away, we believe carefully selected and calibrated exposures to Asian assets can offer enhanced returns to a global portfolio.

For more PineBridge views on what to expect across economies and asset classes in 2021, visit our 2021 Outlook page.


1 Source: RCEP agreement, as of 15 Nov 2020. https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf
2 Source: Peterson Institute for International Economics, as of June 2020. https://www.piie.com/system/files/documents/wp20-9.pdf. Any opinions, projections, estimates, forecasts and forward-looking statements presented herein are valid only as of the date of this presentation and are subject to change.


Investing involves risk, including possible loss of principal. The information presented herein is for illustrative purposes only and should not be considered reflective of any particular security, strategy, or investment product. It represents a general assessment of the markets at a specific time and is not a guarantee of future performance results or market movement. This material does not constitute investment, financial, legal, tax, or other advice; investment research or a product of any research department; an offer to sell, or the solicitation of an offer to purchase any security or interest in a fund; or a recommendation for any investment product or strategy. PineBridge Investments is not soliciting or recommending any action based on information in this document. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author, may differ from the views or opinions expressed by other areas of PineBridge Investments, and are only for general informational purposes as of the date indicated. Views may be based on third-party data that has not been independently verified. PineBridge Investments does not approve of or endorse any re-publication or sharing of this material. You are solely responsible for deciding whether any investment product or strategy is appropriate for you based upon your investment goals, financial situation and tolerance for risk.

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