'Underweight' on India, China to lead Asian outperformance in 2023: Nomura

The 2023 calendar year will be the year of Asia’s outperformance, broking firm Nomura has forecasted but the Japanese brokerage has taken a nuanced view on individual countries. The brokerage, however, expects India’s outperformance could taper going ahead and China to play catch up.

“China’s reopening and recovery will benefit beaten-down North Asia over ASEAN and India,” Nomura has said. It has an ‘underweight’ stance on India. The domestic markets currently trade at 22 times their 12-month forward earnings estimates — more than double that of China and South Korea — the two markets Nomura is ‘overweight’ on.

“Relative valuations even at single stock levels (for India) remain elevated and is our key concern after strong outperformance in 2022. Economy is likely to see a slowdown in growth due to global slowdown which, in our view, is not reflected in consensus expectations. Likely rotation into North Asia in 2023 may imply much smaller than hitherto support from foreign flows,” Nomura has said.

The key risks identified by the brokerage are stretched government finances and oil prices going past $120 a barrel.

On the other hand, attractive valuations and gradual re-opening in the coming months will be a ‘catalyst for re-rating’, Nomura has highlighted.