Thu. Jan 27th, 2022


Semiconductor equipment manufacturers from Japan and China were among the biggest winners of Asia’s stock market in 2021, doubling their valuation from the end of the previous year amid strong demand for high-tech manufacturing.

After 2020’s Covid-driven stock market boom, which generated high-flying digital companies, Asian stock markets had a relatively difficult year in 2021, with China’s regulatory repression weighing on many of the country’s and the region’s most important stocks. But global demand for chips has boosted some lesser-known businesses, with logistics and financial groups also growing as the economy gradually recovers from the pandemic.

Nikkei Asia compared changes in market capitalization of approximately 600 of the largest Asian companies, which at the end of 2020 had a valuation of $ 10 billion or more, based on QUICK-FactSet data from 21 December. About 50 percent of them increased in value, while the other 50 percent lost over the 12 months.

Among the top winners was Japan’s Lasertec, whose market capitalization rose 162 percent during the year to ¥ 2.9tn ($ 26bn).

Lasertec is a niche player in the semiconductor industry, which manufactures an inspection device for photomasks – a tool to create a circuit pattern on silicone wafers. The device ensures that the photomask patterns are accurate and defect-free. Lasertec, an almost exclusive supplier of such devices for the latest EUV photo masks, has attracted investors’ attention throughout the year.

Graphic show Top winners among listed Asian companies in 2021

Top winners among listed Asian companies in 2021

China’s state-backed Naura Technology Group, the country’s largest chip equipment maker, increased its market value by 103 percent to Rmb182bn ($ 28bn). In the first nine months of 2021, its net profit more than doubled during the year to Rmb658 million.

Opponent of Shenzhen-based Applied Materials of the United States and Tokyo Electron of Japan, Naura, raised Rmb8.5 billion in November through a private placement to expand production capacity and improve research and development. Such a move reflects President Xi Jinping’s call for independence in high technology.

This article is from Nikkei Asia, a global publication with a unique Asian perspective on politics, economics, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 division provides in-depth coverage of 300 of the largest and fastest growing listed companies from 11 economies outside Japan.

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Apart from semiconductor stocks, steady manufacturing demand in the Covid-19 recovery phase helped commodity-related stocks rise. Among the top 10 winners were Chinese shipping group Cosco Shipping Holdings, which rose 110 percent, and Indian steelmaker Tata Steel, 83 percent.

Yet in 2021, Asian equities outperformed world equities. The benchmark MSCI All Country Asia Index fell 1 percent last year to December 21, compared to a 17 percent rise in the MSCI All Country World Index.

Throughout 2021, “the most dominant local story for Asian equities was China, and it still remains one,” said Chetan Seth, an equities strategist at Nomura in Singapore. “Tightening of macro- and micro-regulations has caused significant inconvenience to stock investors and is the reason for China’s underperformance in 2021,” he said, referring to Beijing’s restriction on the real estate sector and regulations on sectors such as education, e-commerce and fintech .

As such, China’s education enterprises were the biggest losers of the year. Market valuations of private education companies Gaotu Techedu and TAL Education Group fell 96 percent and 94 percent, respectively. Tens of thousands of teachers have apparently been sacked after companies were forced to turn into non-profit entities under the government’s “double reduction” policy to ease students ‘workload and their parents’ financial burden.

Chart showing the biggest losers among listed Asian companies in 2021

Top losers among listed Asian companies in 2021

China’s most prominent technology companies – Alibaba Group Holding and Tencent Holdings – both dropped from the global top 10 market capitalization rankings, with their valuations falling 51 percent and 22 percent respectively in 2021.

They have mainly come under pressure from two key pieces of legislation that seek to regulate monopoly businesses and data security, in addition to greater scrutiny by US authorities amid geopolitical tensions with China. The stricter regulations are seen as a sign that Beijing is focusing more on hard technologies such as the semiconductor industry rather than on consumer internet, said Dan Wang of Gavekal Research.

The biggest winner of 2021 was China Telecom, one of the three state-owned oligopolistic carriers, which recorded a market capitalization increase of 162 percent – but it comes with a stern warning.

The significant jump in its market value comes mainly from the company’s new listing in Shanghai in August, for which it had strong state support. The move came after China Telecom was forced to delist from New York due to alleged ties to China’s military by US authorities.

Listing on Chinese mainland stock exchanges is generally considered fundamentally different from listing in other markets, as Beijing restricts the free flow of stock investments with the rest of the world. This means the pricing mechanism differs even for the same company that trades on the mainland and elsewhere, such as Hong Kong. The Hang Seng Stock Connect China AH Premium Index, which for example tracks the price difference for double-listed stocks, stood at 47.1 percent on listed mainland stocks on December 24th. As such, it is difficult to say whether the sharp rise in China Telecom’s market capitalization reflects a fundamental change in the company’s value.

When it comes to digital equities outside China, Singapore’s e-commerce and online gaming group Sea, Asia’s biggest winner in 2020, continued to rise, but at a much slower pace of 24 percent, while South Korea’s Cocoa with 48 percent has risen, indicating. investors are still expecting growth in digital services as the pandemic lifestyle changes.

Meanwhile, gradual recovery from the pandemic helped financial equities, as seen in markets like India. Shares in India’s state – owned state bank, the country’s largest commercial lender, rose 62 percent. It has a strong liability profile and the best operating standards among banks in the public sector, which has helped its share perform better than that of its peers.

Chart showing performance of major Asian stock indices in 2021

Performance of major Asian stock indices in 2021

With the economic recovery gaining momentum over the past few months, the bank’s “overall strength in liability franchisee” and “decent supply coverage” should continue to work in its favor, the brokerage firm ICICI Direct said in a research note in November.

Bajaj Finserv, the financial services arm of India’s Bajaj group, increased in value by 78 percent. The company has a presence in retail financing, life insurance and general insurance. In August, it announced that the market regulator, the Securities and Exchange Board of India, had given it as main approval to sponsor a mutual fund. Analysts see the company’s wide spread and focus on profitability as some of the reasons why the stock was among the top picks last year.

On the other hand, signs of a Covid recovery have faced some companies with reduced demand, especially manufacturers of healthcare products. Among the year’s biggest losers in Asia were Malaysia’s Top Glove, the world’s largest manufacturer of rubber gloves, and its local counterpart Hartaleg. Their market values ​​shrank by 66 percent and 56 percent, respectively, in 2021.

Looking ahead, analysts say semiconductor and equipment manufacturers will continue to benefit from strong demand for chips for use in servers, reflecting a strong appetite for investment by cloud service providers such as Amazon, Microsoft and Google.

“High-performance processors used in data centers will be in great demand,” said Hisashi Moriyama, an analyst at JPMorgan, who predicts another busy year ahead for high-end chip foundries such as Taiwan Semiconductor Manufacturing Company, which is the most valuable company in Asia.

Seth of Nomura said he was “fairly constructive about Asian stocks in 2022”, although he noted that the Omicron coronavirus variant and the US Federal Reserve’s recent hawkish policy pivot point are likely to lead to some volatility in entering the first term.

Regarding China, Seth said his fiscal and monetary policies are becoming more supportive as authorities focus on supporting growth. “This will help China’s shares, and consequently Asia’s performance, as the region’s largest market,” he said.

Additional reporting by Mitsuru OBE in Tokyo, CK Tan in Shanghai, Kenji Kawase in Hong Kong and Kiran Sharma in New Delhi

A version of this article was first published by Nikkei Asia on December 27, 2021. © 2021 Nikkei Inc. All rights reserved



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