By Gregor Stuart Hunter
HONG KONG—A stark divergence in the performance of Asian stocks since the U.S. election is becoming clear, even as investors scratch their heads over how the policies of President Donald Trump’s new administration will affect the region.
Among the themes emerging: a preference for companies that are relatively immune to global trade and for those that could benefit from increased U.S. government spending.
For sure, the overall moves in Asian stocks since the U.S. election on Nov. 8 aren’t drastic. The MSCI Asia ex-Japan Index has gained 1.7% since then, trailing a 7.4% gain for the S&P 500.
But the disparity among individual stocks is growing.
Take Sun Art Retail Group /zigman2/quotes/203486761/delayed HK:6808 +1.19% Ltd., a Chinese hypermarket group listed in Hong Kong, whose large market share at home has insulated the company from concerns about talk from Washington of higher tariffs on Chinese exports. Its shares have surged 43.7% since the U.S. election.
By contrast, factory middleman Li & Fung /zigman2/quotes/201638706/delayed LFUGY -6.49% Ltd., which generates over 60% of its revenue from the U.S. through sales of apparel and other goods to companies including Wal-Mart Stores /zigman2/quotes/207374728/composite WMT -1.63% Inc. is perceived as vulnerable to a trade war. Its shares are down 12.9% over the same period.
This sort of wide range in returns is a break with the recent past, said Joshua Crabb, head of Asian equities at Old Mutual Global Investors.
“We’ve seen stock dispersion pick up to levels we’ve not seen since 2009,” he said. “Stock picking is coming back into fashion.”
The question now is whether some of the sharp moves in stocks since Mr. Trump’s win have gone too far, given the uncertainty both over the details of his policy agenda and the timing of its implementation. On trade, for example, it is still unclear what the extent and nature of any new tariffs would be.
Meanwhile, some are preferring to focus on normal trading fundamentals, such as corporate earnings.
“I’m not seeing that picture where markets are pricing in a trade war at the moment,” said Jack Siu, investment strategist for Asia-Pacific at Credit Suisse /zigman2/quotes/202835784/composite CS +0.81% . “Equity markets are actually focusing on earnings results, which have been outperforming so far.”
A recent tendency for Asian stocks to move broadly in unison broke down after Mr. Trump’s election victory, largely because the U.S. interest-rate outlook has changed, said Olivier d’Assier, managing director for Asia-Pacific at Axioma, which sells risk-management tools to the financial-services industry. Mr. Trump has promised corporate tax cuts and higher fiscal spending,which analysts think could drive inflation higher, forcing the Fed to counter with rate increases.
“Investors need to keep this driver in mind after almost a decade of not having to think about it,” Mr. d’Assier said.
With government bond yields rising, stocks that traditionally offer investors high dividend returns have become less attractive, particularly in the telecom and utilities sectors. HK Electric Investments /zigman2/quotes/204522904/delayed HK:2638 -0.51% Ltd., a Hong Kong-listed utility company, for example, is down 15.2% since the U.S. election, while Indonesia’s Tower Bersama Infrastructure ID:TBIG -1.24% , which leases telecommunications towers, is down 12.4%.
Meanwhile, the companies that could gain from an increase in infrastructure spending and a rise in commodity prices have benefited, such as Hong Kong-listed mining firm Jiangxi Copper /zigman2/quotes/201334192/delayed CN:600362 -0.54% Co., whose shares are up 36.4% since the U.S. vote.
If a trade war does happen, countries with large domestic economies such as India would likely fare better than smaller, more open and export-driven nations such as Singapore, said Tim Orchard, chief investment officer for Asia Pacific ex-Japan at Fidelity.
“We’ve all been lulled into this sense in the last two or three decades that trade policy goes in one direction and moves towards freer trade,” he said. “Here’s somebody that for the first time in a very long time is saying something very different.”
Write to Gregor Stuart Hunter at email@example.com