Asian markets are “glass half full” in terms of opportunities, economies and growth, but that hasn’t always translated into investment returns, said Richard Jones, director of First State Stewart Asia, part of Colonial First State Global Asset Management.

Jones told the audience at the Investment Magazine Equities Summit the historical evidence of growth in Asian economies has been strong but the return on investment has been less evident.

“Top down, no problem, no question, it’s historical and proven, but from the point of view of equity returns, perhaps a bit more difficult,” Jones said. “This is how we’ve felt much of the time in the last few years. It’s been a tough period, as we’ve heard again, from active managers. I’d say that over the last 12 months, it’s become considerably easier.

“We have all lived through the biggest bull markets in our lifetimes, but it sure as hell hasn’t felt like it, I would say. Tired and emotional, somewhat volatile, and increasingly conflicted…It has been, in my view, quite a miserable bull market. Previous bull markets seem to have been a lot more fun.”

Jones said that while previous panels at the conference had referred to China as the elephant in the room, from his perspective, investors were “in bed with an elephant”, as China’s share of the Asian economy has risen from 49 per cent a decade ago to 95 per cent today, and China’s contribution to global growth rates has been 50 per cent.

He pointed to macroeconomic factors such as China rebalancing its economy, reducing debt levels, and pulling back liquidity, which in Jones’s words is causing problems in other emerging markets.

He also noted that First State Stewart Asia follows a bottom-up stock picking strategy, focusing on companies that capture growth and are high quality around areas such as governance.

Overall, Asian investment continues to perform well, from Jones’s point of view.

“We’re slightly above the median,” he said. “That’s the point that’s often missed – there is a lot of awfully negative news out there, as if things have really changed and turned, but actually nothing bad has happened. Markets have held up relatively well.

“All of this noise, all of this barking [can scare you senseless and] keep you out of the marketplace. At the end of the day, the caravan rolls on, the sun comes up, life goes on, companies do what they do. Earnings growth is still there, it’s still double-digit; if you can in any way leverage the growth I’ve talked about, you should end up with a pretty decent result.”

Rachel Alembakis has more than a decade of experience writing about institutional investments, asset owners, custody and administration for a variety of publications.
Leave a comment