Wall Street investors have been paying close attention to the growth in Asia. In 2023, despite various challenges in the region, especially in China’s real estate sector, stocks in a number of countries saw double-digit returns. The high-performing stocks came esepcially from Taiwan, Japan, India, South Korea, Vietnam, and Indonesia. Therefore, in this article, we spotlight three Asian stocks to buy in May.
Looking at global growth numbers, we note that by 2030, Asia is expected to contribute well over 55% of the global gross domestic product (GDP). Research suggests that the region’s growth trajectory is driven by a combination of factors, including urbanization, technological advancements, and government support for entrepreneurship and innovation. Against this backdrop, many investors are increasingly turning their attention to Asian stocks to buy, which may offer a unique blend of growth, value, and diversification benefits. Let’s take a closer look.
Toyota Motor (TM)
Japan-based Toyota Motor (NYSE:TM), our first pick among Asian stocks to buy, is a titan in the region’s automotive sector. As a result, TM stock offers a compelling mix of brand strength, geographic reach, and robust financial standing. Some investors have concerned about the company being a late comer in the rush towards electric vehicles (EVs) compared to some rivals. Yet, the company’s recent focus on hybrid technology and its “multi-pathway” approach to electrification shouldn’t be underestimated.
The Asian automotive giant announced the financial results for fiscal year 2024 on 8 May. Full year revenue of 45 trillion Japanese yens (JPY) was up 21.4% compared to 37 trillion JPY for fiscal year 2023. In addition, earnings per diluted share almost doubled. Investors noted the strong financial fundamentals, solid balance sheet, and efficient cash flow management.
Meanwhile, analysts point out Toyota’s management is investing in software-defined vehicles, generative AI, and electrification, including battery EVs and plug-in hybrids. The Japanese auto giant is also enhancing hydrogen mobility solutions, positioning itself at forefront of innovative automotive technologies.
TM stock has returned about 19% year-to-date (YTD) and the dividend yield is a strong 2.1%. The shares are trading favorably at 9.25 times trailing earnings and 1 times sales. Wall Street remains bullish on TM shares while the 12 month median price forecast for TM stock stands at $246.56. Such an upward move in Toyota shares would mean an upside potential of over 12% from current prices.
Yum China (YUMC)
Next up on our list of Asian stocks to buy is Yum China (NYSE:YUMC). The company operates popular restaurant chains like KFC, Pizza Hut, and Taco Bell across mainland China. Wall Street notes that Yum China has not only capitalized on the interest in Western fast-food concepts in Asia but has also tailored its offerings to mesh seamlessly with local food tastes and preferences. This established player in Asian stocks boasts a strong track record of growth and offers a dividend for income-oriented investors.
The first quarter of 2024 was particularly strong for Yum China, with system sales growing by 6% year-over-year (YOY), building on a 17% growth from the previous year. Revenue for the quarter reached a record $3 billion, and the core operating profit grew by 1% to $396 million. Earnings per diluted share also increased 4% YOY to 71 cents.
At present, the company has over 20,000 stores across mainland China. Looking ahead, Yum China aims to expand its footprint by another 20,000 in the next two years. Management is expected to focus more on lower-tier cities, which benefit from affordability of housing and living costs. Moreover, the rapid development of new shopping malls and commercial developments across China may provide fertile ground for new restaurant openings.
However, despite the significant growth drivers China offers, so far in 2024, YUMC stock has declined over 11%. We should remind readers that the current dividend yield is 1.7%. Meanwhile, Yum China shares are changing hands at 18.9 times trailing earnings and 1.4 times sales. Finally, the 12-month median price forecast is at $53.60 suggesting an upside potential of over 40%.
SPDR S&P Emerging Asia Pacific ETF (GMF)
The Asian region is a hub for numerous global economic powerhouses, including some of the fastest-growing economies worldwide. Our next pick of among Asian stocks is an exchange-traded fund, namely the SPDR S&P Emerging Asia Pacific ETF (NYSEARCA:GMF). This fund offers investors a strategic entry into this dynamic market without having to choose individual Asian stocks to buy.
The GMF fund was launched in March 2007. Its diverse portfolio of over 1300 stocks is heavily weighted towards information technology (25%), financials (18%), and consumer discretionary (15%) sectors. It has significant holdings in China (37%), India (28%), and Taiwan (26%). This dominance of Chinese stocks exposes investors to robust exports and one of the world’s largest consumer markets as China’s middle class expands.
The top 10 businesses comprise about a quarter of the net assets of around $350 million. Among these holdings are industry giants such as Taiwan Semiconductor Manufacturing (NYSE:TSM), Tencent (OTCMKTS:TCEHY), Alibaba (NYSE:BABA), Reliance Industries (OTCMKTS:RLNIY) and HDFC Bank (NYSE:HDB).
So far in 2024, GMF has advanced over 5%, reaching a 52-week high on May 10. Trading at 14 times trailing earnings and 1.8 times book value, the fund still offers an attractive valuation level. Moreover, it has a 2.6% dividend yield, providing additional income potential. Finally, investors should note an annual expense ratio of 0.49%.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
