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2023 demonstrated the importance of US equity exposure for Asia's investors

Jovi Ho
Jovi Ho • 2 min read
2023 demonstrated the importance of US equity exposure for Asia's investors
The S&P 500 was a standout performer last year, posting a 26% total return in 2023 and more than offsetting its loss of 18% in 2022. Photo: Bloomberg
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The S&P 500 was a standout performer last year, posting a 26% total return in 2023 and more than offsetting its loss of 18% in 2022.

2023 demonstrated the impact of US equity exposure for Asian investors, says Sue Lee, director and APAC head of index investment strategy at S&P Dow Jones Indices. 

Representing nearly 60% of the global equity market, US equities provide a larger opportunity set outside of Asia, writes Lee in her 2023 Market Review for Asian Investors, released on Jan 22.

US equities also offer potential diversification, with different economic structures and cycles between markets, along with differing sector exposures, she adds.

In contrast, a slower-than-expected economic recovery in China and ongoing US-China tensions weighed on market sentiment and performance last year, writes Lee.

This weighed down on China and Hong Kong, which were among 2023’s relative underperformers with their S&P Broad Market Index (BMI) market indices, losing 10% and 15% respectively.

See also: A US$600 billion wall of debt looms over US market's riskiest stocks

However, equity markets remained resilient in other parts of the world that had stronger economic backdrops, says Lee. “Easing inflation and the potential for lower interest rates led to a sharp market rally in the fourth quarter, with the S&P Global BMI closing the year with a solid 22% total return in US dollars.”

IT, communication services best performers 

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That said, the contribution to the market return from a few select US stocks was unusually high in 2023, notes Lee.

The so-called “Magnificent Seven”, namely Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla, surged 112% on average over the year, contributing 58% of the S&P 500’s return.

With the Magnificent Seven rising 4% on average versus the S&P 500’s 1%, as of Jan 19, the relative performance of these mega-caps continues to be observed as we enter 2024, says Lee.

Compared to 2022, Lee also notes reversals across sectors. Information Technology (IT) was the best-performing sector in 2023, with an “impressive” 58% gain following a 28% loss the year prior.

The IT sector contributed over 50% of the S&P 500’s return in 2023. Meanwhile, the communication services and consumer discretionary sectors also posted strong gains of 56% and 42% respectively, after steep losses of 40% and 37% in 2022. 

Utilities and energy were the only sectors that closed the year in the red after positive returns in 2022.

Infographics: S&P Dow Jones Indices

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