Managers see more mileage in Asia despite strong rally

While Asian stocks have enjoyed a good run, the reality is that the ­continued flow of upbeat company news is offsetting share price ­appreciation as earnings continue to strengthen.

Liz Evans, the manager of the newly launched Asia Pacific fund at Cavendish Asset Management, says that on current valuations, the market remains attractive despite the strong rally.

Last week the Asian Development Bank raised its forecast for growth in developing Asia this year from 3.4% to 3.9%.
“The global crisis has made the recovery story more resurgent as Asia has emerged in much better shape than the West,” Evans says.

Of the smaller markets in Asia, Alistair Thompson, the deputy head of Asia at First State Investments, says Indonesia and Thailand rallied strongly on the return of risk appetite in the second half of the year.

Evans adds that China and several South East Asian countries, including Indonesia, Thailand and Singapore, look attractive.

Veritas Asset Management revealed last week it will launch a China fund in October. Ezra Sun, the manager, des­cribes China as “one of the most exciting markets for the next decade”.

In terms of investment opportunities, China and India have performed best, says Thompson.

China has benefited from economic recovery driven by government-directed bank lending while India investors responded positively to better than expected ­performance by the Congress Party in elections.

Aniup Maheshwari, the head of equities and corporate strategy at BlackRock, says the portfolio of BlackRock’s India fund is positioned to benefit from an increase in consumption. This includes consumer goods, pharmaceuticals, bank­ing and industrials. Over the past six months the fund’s managers have partially reduced exposure to defen­­sive sectors and added com­modities and economy-sensitive sectors.

More than half of Thompson’s portfolio is invested in consumer-related companies that he expects to be relatively immune from problems in the West. He finds opportunities in financials, including banks, property and conglomerates.

The energy sector has also done well because of a strong oil price.

Sun will adopt a strong thematic approach focusing on social, political, economic, cultural and technological factors. Veritas expects these factors to be the main drivers behind growth in the region.