Look to India, Japan for ‘quality alpha’ amid market uncertainty, investor says

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Look to India, Japan for ‘quality alpha’ amid market uncertainty, investor says

An employee counts Indian currency notes at a cash counter inside a bank in Kolkata.

Rupak De Chowdhuri | Reuters

Investors searching for “quality alpha” in Asia over the next six to nine months should look to India and Japan given the uncertainty in China, according to Lincoln Pan, partner and co-head of private equity at the Asia-focused alternative investment firm PAG.

“I think there needs to be more discussion, particularly in this part of the world, about India, and an understanding of what’s happening in that marketplace,” Pan told CNBC’s Emily Tan at a “Delivering Alpha” event in Hong Kong last month.

“The strongest thing supporting the India market at this point is the growth of domestic equity flowing into the domestic equity markets,” the investor said, adding that India has “a tremendous amount of fundamental growth compounded by capital flows in the market.”

Pan sees the private equity space in India — home to a new and growing generation of super-rich — as “an area of growth.”

Elsewhere, the burgeoning interest in artificial intelligence and its ripple effect on infrastructure should have investors looking at “renewable energy development [and] data center development in Japan, as well as in southeast Asia,” he added.

China concern

Despite hope and speculation about a ******** recovery among investors, Pan said they would have to wait “until there is a sustained stimulus by the government to drive back the consumer economy.”

“If you’re looking for alpha, I think it’d be very challenging to find right now in Greater China,” Pan told CNBC’s Tan.

China has been striving to boost economic growth as a real estate slump and uncertainty about future income has continued to weigh on consumer spending and business confidence, adding to deflation concerns.

The world’s second-largest economy expanded by 5.4% in the final quarter of 2024, exceeding forecasts, as a flurry of stimulus measures powered the economy to meet Beijing’s growth target.

However, some economists have suggested that China’s recovery may not be as rosy as the headline figures suggest, given the specter of deflation and U.S. President Donald Trump’s imposition of 10% additional tariffs on ******** imports.

Head of China’s National Bureau of Statistics Kang Yi previously warned that the “unfavorable impact of external factors may deepen” this year.

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