Wall Street identifies "tariff safe haven": Asia's essential consumer stocks.

On Wall Street, it is believed that the global trade war has brought good news to Asian consumer stocks, favoring companies that meet the basic needs of local buyers. After the United States imposed additional tariffs on April 2nd, strategists from Goldman Sachs and Morgan Stanley recommended Asian consumer staple stocks in their reports, urging investors to shift towards defensive strategies. Fidelity International also pointed out that they quickly bought Chinese consumer stocks, betting that these companies would benefit from government stimulus measures. Since April 2nd, the MSCI Asia Pacific Consumer Staples Index has risen by 5%, making it the best-performing among 11 sectors, outpacing the overall market's 2.5% decline. Chinese chain supermarket Yonghui Superstores (601933.SH) and Japanese food production and distribution company Kobe Bussan have both risen by at least 19%, while some other beverage and dairy manufacturers have also performed well. This sharp reversal of fortunes for the industry comes after several years of decline, as the tech sector soared amidst artificial intelligence hype. This highlights that as the trade tensions threaten to slow down the global economy, investors are beginning to move away from growth stocks. Signs of Asian governments preparing fiscal stimulus measures to support spending have also boosted this group. Chief Investment Strategist at Singapore's Bank of Singapore, Charu Chanana, stated that China's strong performance signifies a shift in investor sentiment towards seeking refuge in domestic demand elasticity as opposed to chasing global export growth. She said, "Investors are beginning to price a world that is more diversified and protectionist, in which local policy support and consumption are more important." While no industry is immune to the prolonged trade war, consumer staples have shown resilience during times of economic pressure. This has helped the industry benchmark index recover after four consecutive years of decline by 2024, while the MSCI Asia IT Index has been on an upward trend since 2019, indicating room for catch-up. With the introduction of fiscal stimulus plans, this emerging trend of rotation may continue. The Chinese government recently listed 48 measures to expand household spending on dining and healthcare, while South Korea has raised its supplementary budget plan to 12 trillion Korean won (84 billion US dollars). In India, the monsoon is expected to be above normal levels, which will improve rural demand. Portfolio Strategist at Fidelity International, Terrence Kan, stated that Fidelity International took advantage of the opportunity presented by the decline in the Chinese mainland and Hong Kong stock markets on April 7th, increasing holdings in consumer staples and some non-essential stocks related to tourism. He prefers stocks listed in the Chinese mainland as they may benefit more from government support measures. During times of market volatility, the performance of Asian consumer stocks has also been better than their counterparts in the US and Europe, thanks to quick commitments from various countries to provide policy support. In a report on April 6th, strategists at Goldman Sachs upgraded their rating of Asian consumer staples from "market perform" to "buy," stating a preference for "local and defensive" options. Last Thursday, strategists at J.P. Morgan similarly upgraded their rating for the Southeast Asian consumer staples industry. Chief Investment Officer at Tokio Marine Asset Management International Pte, Hiroori Akizawa, stated, "Consumer staples are not a highly volatile industry," with relatively fewer companies having significant exposure to US exports. "A positive aspect is that major central banks will implement interest rate cuts to boost consumption." In contrast, the stock prices of companies in the discretionary goods industry have been affected as households are expected to cut back on non-essential spending. Since April 2nd, the MSCI Asia Pacific Consumer Discretionary Index has fallen by over 5%, making it the second largest decline among all sectors. Senior Investment Director for Asian equities at Aberdeen Investments, James Thom, stated that non-essential consumer goods face the risk of increasing inflation, which may dampen investors' enthusiasm for the industry. However, there is now a consensus forming that the consumer staples industry is a safer choice. It is expected that over the next 12 months, the earnings growth of the industry index will be double that of the MSCI Asia Pacific Index. Chief Market Analyst at AT Global Markets, Nick Twidale, stated, "In this scenario, the consumer staples industry will continue to be the focus of investors, and if risk appetite rebounds, we may see a return to non-essential and service stocks. I believe this will only happen if the US changes its tariff policies."