For Asia, 2021 was tease. It was a year that often promised something better, only to deliver everything worse. It’s hard to escape the feeling at the end of the year that we are back in much the same position as when it began.

This story originally appeared on Jan. 3, 2021 on TheStreet.com and its subscription service Real Money. Click here for the original story.

Will 2022 see the Asia Pacific region finally escape its cycle of opening up, then locking down again? There were tentative attempts to welcome foreign visitors once again in countries like Thailand, Vietnam and Indonesia. That gave way to a hellish pattern of waves of virus washing over the region, with all the travel bans, curfews and stay-at-home orders that unfold in response. Asia’s production schedules and shipments have been heavily disrupted as a result.

China persists in its zero-Covid strategy, an ultimately impractical approach that is exported to Hong Kong as East Asia’s financial hub attempts to open the mainland borders. Anyone returning from overseas must spend three weeks in an expensive hotel. China will likely maintain its position at least until the “coronation” of President Xi Jinping for a third term. That will come in the power reshuffling confirmed during the weeklong 20^th National Congress, the latest in a series of once-every-five-years major meetings that is due to happen in October or November. March will see the growth target set at the annual National People’s Congress.

Before that, the Beijing winter Olympics will go ahead from February 4-20 in front of Chinese spectators, if all goes to plan. The winter events will make Beijing the first city to host both summer and winter games. But the political undercurrents are strong. The Olympics will go ahead minus diplomatic delegations from the United States, United Kingdom, Canada and Australia, in protest of the human-rights violations in China’s westernmost Xinjiang province, and the death of civic society here in Hong Kong. China says those politicians weren’t invited in the first place…

Other governments in the Asia Pacific region, led in this regard by Singapore, Australia and New Zealand, appear willing to try something other than “zero Covid.” Ratchet up the vaccine rate, do your best to protect and triple-jab the vulnerable, and learn to “live with Covid.” This seems the sensible approach.

When you look at the 26.9% gain for the S&P 500 in 2021, the 21.0% gains for the Eurozone stocks in the Euro Stoxx 50 index, and the 14.3% advance in London’s FTSE 100 index, it has been a disappointing year for Asian equities. There’s scope for them to gain ground in relative terms.

The S&P Asia Pacific Broad Market Index, which tracks developed markets in Asia, posted a loss for 2021, down 0.6%. But that was a better showing than the S&P Asia Pacific Emerging BMI, which netted a 2.3% decline for the year. China-linked plays had a torrid time.

There were solid gains for the Tokyo market, with the broad Topix index up 10.4% for the year. But it was a tougher time for export-oriented companies, as reflected in the poorer 4.9% showing for the Nikkei 225, which tracks big-caps and multinationals. Those kinds of companies should benefit in the year ahead from a weaker yen, as the Fed boosts the dollar by raising rates.

I’ve indicated before that the Japan market will be a safe haven in 2022. We can be certain that the central Bank of Japan will maintain its exceedingly easy monetary policy, with Japanese interest rates still negative at -0.10%. Inflation is not a concern, as yet, in Japan – in fact, it is desirable. The central bank and the government have struggled to achieve a 2% inflation target since setting that as a goal way back in 2013.

The Japanese economy should post strong (for it) growth of 3.2% in 2022, according to IMF estimates, up from 2.4% last year. It’s a similar pace of growth as you’d find in South Korea, Taiwan and Singapore, all typically more dynamic in recovery mode. Underpinning it all, the Japanese government under new Prime Minister Fumio Kishida passed a record US$490 billion stimulus spending package in November, bucking the trend toward tapering in other developed markets.

Value Partners, the Hong Kong-based asset manager, indicates that “investor sentiment towards Japan remains weak, and needs time to pick up,” it states in its 2022 market outlook. “Corporate earnings will likely continue to recover and we view that Japan will be one of the very few countries that will continue to have earnings upgrades.”

Australian stocks also delivered steady if not stellar performance, with the S&P/ASX 200 index up 13.0%. “With pent-up demand following Q3 lockdowns, a high vaccination rate, elevated confidence and rebounding mobility, the stage is set for a strong six months” in Australia, Nomura predicts in its global economic outlook for 2022.

Singapore’s Straits Times index didn’t quite post double-digit gains, up 9.8% in 2021. Like Australia, Singapore is now exceptionally poised having vaccinated the vast majority of its populace. The jobs market is improving, while the strength of high-end manufacturing and pharmaceuticals should stand the city-state in good stead for the year ahead. It’s a likely outperformer.

The problems with supply chains globally hurt South Korea, where the Kospi advanced only 3.6% all year. Despite the heavy influence of semiconductor producers on the Seoul market, electronics- and tech-related exporters did not experience the stellar kind of year they had in 2020, when the world couldn’t get enough gadgets to keep people company in lockdown.

Korea will have presidential elections in March, which add an element of uncertainty to the market. The central Bank of Korea also became the first in Asia to raise rates back in August, did so again in November, and will likely continue to tighten throughout 2022 to combat rising prices and home-price inflation. Rates may rise to 1.5% by the end of the year. That makes it a hard market to like for now, with South Korea’s highly indebted population sure to struggle under straightened circumstances. There’s pressure on the Seoul home market, where prices have doubled in the last five years.

The strongest showing in Asia came in India, where the Sensex posted a 21.7% gain for 2021, with the Nifty 50 up 23.8%. In fact, it’s been a very strong showing by the Mumbai market since the original depths of the first wave of Covid back in March 2020. The Indian market has more than doubled since then, with the Sensex up 111.1%.

That’s come on the back of breakneck growth, the world’s strongest major economy with a pace of 9.5% in 2021, likely to moderate to 8.5% in 2022. Reflecting that slowdown, Indian equities have flagged since mid-October, down 5.7% in the last 10 weeks of the year, so there’s no surging strength to carry them into the new year.

“While India enjoys a long-term secular bull market with expanding new-economy sectors, and is still in the upward profit cycle, we are cautious as valuations are at extreme levels versus the rest of Asia,” Value Partners notes.

Taiwan also outperformed as a market, a rare year when it did not move in lockstep with South Korea. The Taiex index added 23.7%, with electronics makers booking strong orders. Taiwanese companies also benefitted from sanctions and restrictions on some mainland Chinese manufacturers. In Taipei, retail traders became very active in the market, and have not been hampered by the higher rates seen in Korea. The Taiwanese central bank may start to raise rates next year, which could stem the tide of retail flows.

There was a narrow 0.2% loss in the Philippines, where the process of vaccinating 110 million people across 7,000 islands proving exceptionally difficult. The task is even more trying in the world’s largest archipelago, Indonesia, with the world’s fourth-largest population of 274 million people spread across 17,000 islands.

The commodities boom and increased digitalization of the Indonesian economy drove the Jakarta market up 10.1% in 2021. Vaccination rates and the success of “back to normal” business will dictate the future direction of equities in both island nations this year.

More than anything, 2021 became the year that the full vulnerability of investors in China was exposed. A series of sudden, overnight regulatory actions made it eminently clear that the Chinese Communist Party puts its own interests and its diktats over the Chinese people far above any common capitalist concerns about investor protection.

First, the for-profit tutoring industry was essentially banned. Then young people were restricted to at most three hours of videogame playing over the weekend. Next came an assault on Big Tech, with all China’s largest tech companies called in for a dressing down, and ordered to change their ways. Most recently, the country has started revising its securities laws to restrict how and where Chinese companies can go public.

Caught in the crossfire were the poor investors who bought into the “China story,” such as those who subscribed to the international offering of DiDi Global, the Chinese ride-haling market leader. Its business should be a huge growth market – scratch that, it is a huge growth market. But DiDi ran afoul of rules that didn’t exist, fulfilling the requirements of securities regulators for a foreign listing but failing to appease the newly-powerful, previously obscure cyberspace-security review office.

DiDi saw its apps stripped from Chinese app stores, and was barred from signing up new customers. That tanked its business, with the company last week posting a US$6.3 billion loss for the first nine months of the year. And it tanked its stock, an immediate descent days after its June 30 listing that leaves it down 64.8% as of the end of the year.

So it was Chinese and Hong Kong stocks that saw the most-pessimistic mood all year. The CSI 300 index of the largest stocks in Shanghai and Shenzhen fell 5.2% over the course of 2021.

Life was even worse here in Hong Kong, where the much-hated National Security Law continues to be used to pound pro-democracy activity, and anyone deemed “anti-patriotic.” The benchmark, the Hang Seng index, plunged 14.1% over the last 12 months.

Hong Kong’s mix of overseas-inclined Chinese companies, in particular those that also have U.S. listings, drew it down. The city also has a hefty influence from Chinese property developers. Many of those are in or on the brink of default, led by China Evergrande Group, which lost virtually all its value, down 88.8% over the last 12 months.

Hong Kong has been my home for the last 20 years, but it’s terrible to see it suffer so. We are walled in by excessive quarantine, treated to an East Germany-style police state, and are losing the international attractiveness that a once-free city has surrendered.

In Beijing, there is no sign that Chinese regulators will ease up their pressure on overleveraged developers. President Xi has cast scorn on investor-owners, repeating his insistence that “Houses are for living in, not for speculation.” This flies in the face of conventional wisdom, where the incredible unpredictability of the stock market leads anyone with any money to look to invest it in property, first and foremost.

Not that consolidation will be a bad thing in the long run in the property industry. There are too many Chinese developers, 103,262 of them as of 2020, the last count by Statista, a number that grew 21.1% in a decade. Fly-by-night behavior and overborrowing to fund rapid development drove land prices sky high, and homes in the biggest cities are the domain only of the wealthy.

But it is a painful correction as the model is disrupted of pre-selling flats off plan, then racing through development to the next project. Local and provincial governments have based their budgets on aggressive land sales projections, too, so there’s desperation at that level and reports of deep wage cuts among local Communist Party officials.

I don’t see any way to recommend Chinese stocks in 2022, except as a completely contrarian or bottom-feeding play. They are too unpredictable at this stage. Someone is going to make a lot of money when Alibaba Group Holding rebounds. It’s an extremely profitable company that saw its share price fall 47.8% in 2021 in a move that had nothing to do with its fundamentals. But a bet on the company is essentially a bet on what kinds of regulations the Chinese government will implement, without warning. It is not your conventional rebound story.

If you know what social changes Beijing is going to push next, and which companies it will target, perhaps you can make that kind of call. If not, there are better places to invest your money where you can be sure your ownership is valued, protected, and means something.