Between the first day of US-Israel strikes on Iran (28 February) and 9 March, Korea's Kospi index lost almost 20%, while Taiwan's Taiex index dropped 10% and Japan's Topix fell 9.5%
Fund managers and economists have remained "optimistic" about the outlook for some of the hardest-hit markets in the recent global sell-off, suggesting opportunities exist to buy the dips.
Asian equity markets – in particular, Korea, Taiwan and Japan – have seen the steepest declines as a result of intense conflict in the Middle East, due to their higher dependence on energy imports from the region.
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Between the first day of US-Israel strikes on Iran (28 February) and 9 March, Korea's Kospi index lost almost 20%, while Taiwan's Taiex index dropped 10% and Japan's Topix fell 9.5%, according to data from MarketWatch.
However, those markets should remain "top of mind" for investors looking for added diversification, said James Flintoft, head of investment solutions at AJ Bell.
"Equity markets in Korea, Taiwan and Japan have seen some short-term momentum reversal but are some of the best performing markets this year," he said.
Year-to-date, the Kospi, Taiex and Topix indices are up 32.5%, 16% and 7%, respectively.
"The AI supply chain rally has been a big driver within these markets, coming from TSMC in Taiwan and Samsung Electronics and SK Hynix in Korea. Aside from that, there is a continuing tailwind from corporate reform in Korea and Japan," Flintoft added.
In a note last week (6 March), Goldman Sachs strategists said investors should see any correction in equities as a buying opportunity, echoed by data from AJ Bell, which found that DIY investors placed twice as many buy trades than sells on the platform between 2 and 6 March.
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Capital Economics' head of markets, Asia Pacific, Thomas Mathews, said recent events have served as a reminder that "even if the war (or at least its effect on markets) does end, Asia's equities – especially Korea's but also Taiwan's – remain highly sensitive to expectations for the AI capex rollout".
However, he remained "upbeat on that" and "optimistic about the region's equities in the medium term".
On Japan, Joe Bauernfreund, portfolio manager of AVI Global trust, said the magnitude of the sell-off appeared disproportionate to underlying fundamentals, leaving parts of the market looking oversold.
"This may present an attractive entry point for investors, particularly given Japan's macro backdrop is more supportive than at any point in decades, with sustained wage growth, improving domestic demand and a structural shift away from deflation," he said.
Abbas Barkhordar, manager of the Schroder AsiaPacific fund, insisted the long-term investment case for Asia remains unchanged.
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"Market volatility has been driven more by positioning and sentiment than by structural deterioration," he said.
"With Asian valuations still attractive relative to global equities, periods of risk-off sentiment can create opportunities to add to fundamentally strong companies with experienced management teams, many of which have navigated past volatility effectively."
Rob Secker, emerging markets portfolio specialist at T. Rowe Price, said the key risk for emerging markets from here is a potential flight to safety and accompanying strength in the US dollar, which would typically lead to outflows.
"However, taking a longer view, this conflict reinforces the trend whereby nations are investing heavily to secure their own future defence, energy, commodity and food requirements," he concluded.
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