7th February 2013
As the manager points out returns from Asia exceeded most expectations last year though of course that is not necessarily a guide to this year. The MSCI AC Asia ex Japan index was up 22.7 per cent in 2012. Dobbs, who manages the Schroder Asian Alpha Plus fund, notes that this was part of a global improvement. But he says the “structural growth story” remains intact. He also says this applies beyond the usual power houses of China and India. Here is his list.
1. Asia is one of the fastest-growing regions in the world
As one of the most dynamic and exciting regions at the moment, Asia has consistently overshadowed western economies and their anaemic growth rates. In fact, it stakes a claim to being the primary engine of global growth – and this isn’t just confined to China. Across the region, there are a diverse range of economies at varying stages of development, offering investors select opportunities from which to choose. Its demographics are one of its defining strengths. While Asia currently accounts for 30% of global GDP, it has nearly three fifths of the global population.
2. Asia possesses quality companies across a broad range of industries and sectors
Many of the global titans of business in the future are likely to be listed on Asian stock exchanges. A clear focus on bottom-up stock selection helps identify companies that offer the greatest potential of driving future returns.
3. Asian economies are more stable and sustainable
Following the Asian financial crisis in the mid-1990s, Asian governments have been working hard to strengthen their balance sheets. Furthermore, many countries now have much lower debt-to-GDP ratios than most Western economies, along with among the lowest debt-to-equity ratios in the world.
4. Asia is increasingly independent
Although complete ‘decoupling’ of Asia’s emerging economies and those of the West has not been realised, increasingly Asia is becoming more independent. A shift away from its usual global-export model has seen a more regionally-focused growth model take its place. While it may be hard for the region to ignore what’s happening in Europe or the US at the moment, the potential impact has been less severe than it may have been ten or 15 years ago.
5. Asian policymakers have flexibility
The region continues to have the ability to act if needed. While in developed Western economies interest rates are at all-time lows, Asian central banks have the capacity to cut interest rates if needed – which should go some way to support economic activity in the wider region in the event of global weakness.