progresses. Domestic earnings will improve, Regionally, we are more positive versus consensus as should margins, against the backdrop of in Asia Pacific excluding Japan, with the Asean renewed levels of investment in infrastructure. and Indian economies standing out, building on a We are positive on consumer staples, financials, robust recovery thus far in 2022. Within the region, and healthcare, but in general much has been we are long-term positive on both India and discounted across the market. Indonesia, amid robust multiyear growth supported by favourable demographics, including a growing Caution required middle class and rising disposable incomes. On its own, Indonesia is a net energy exporter and is one If central banks remain excessively hawkish and of a few countries to benefit from increased energy over tighten monetary conditions through a mix prices, which should persist into 2023. of interest rate hikes and quantitative tightening, there is a risk of an inflationary bust this year, with Chart 4: Consensus earnings forecasts (FY23) economies struggling to mitigate the damage. This could hurt both the real economy and asset prices. Asia Pacific ex Japan We remain cautious of current conditions US and believe now is the time to be invested in high quality stocks that are best placed to Global weather market volatility, while also looking for EM opportunities to gain exposure to long-term secular growth sectors like clean energy and electric Europe vehicles. Defensive areas such as financials Japan and utilities could outperform as the economic 0% 2% 4% 6% 8% 10% slowdown takes hold. For utilities, we favour 2023 Est names (ex-US) with valuations that provide a good margin of error and where better cash generation/ Source: IBES earnings estimates, Fidelity International, 30 September 2022. certainty of returns will be rewarded, despite elevated power prices that are likely to come off - a headwind to earnings growth. 13 Investment Outlook Fidelity International