Jason Pidcock, manager of the Newton Asian Income fund, tells Cherry Reynard which markets he is turning to in order to continue fuelling his winning streak.
As a region, Asia has not necessarily delivered stock market returns in line with its economic promise. However, Jason Pidcock has successfully uncovered areas of growth in the region, while avoiding its beartraps, in his eight years at the helm of the Newton Asian Income fund. The result has been performance that has matched investor expectation of returns from the high growth region.
Pidcock’s approach builds on the wider Newton Income franchise and follows a similar long-term stock-picking approach, governed by structural global themes.
“Over the long-term, it comes down to the companies and the quality of the management. We need to see integrity, ambition and ability. Integrity is a given but we want to be sure they have a vision for the company, that they are hungry, and we have got to understand how that ambition gets us where we want to go,” he says.
The Newton Asian Income manager smells 'something rotten' in China
He believes this assessment is his key area of value-added expertise. He is backed by Newton’s formidable team of analysts doing the number-crunching on companies but it is his job to judge management skill.
Pidcock believes Asia offers plenty of opportunities but is not without its potential pitfalls: “Asia and emerging markets are still where we find growth, where the money is. But fewer other people are hunting there as well: I can find little nuggets that not many people are looking at.”
There are long-term thematic opportunities in the region: “We tend to always be overweight healthcare because healthcare spending is a fantastic long-term theme. The populations are getting older and there are higher barriers to entry in the sector,” he explains.
But there are plenty of areas where stock market growth has not matched the economic potential of the region and Pidcock is careful to avoid those. He says: “The fund has had an historic underweight to India. The demographic story is strong but there are not enough people productively employed in the country.”
It has also led him away from China, even though the GDP numbers are strong.
“It is profitability that counts and companies are not as profitable as they should be. There is something rotten in China and it’s the corporate governance issue. It is not a Thugocracy like Russia but lots of companies are not in control of their own destinies,” he says.
Pidcock would prefer to concentrate his attentions on the 600 companies based elsewhere in South East Asia. In the Philippines, in contrast, he says the government is doing a ‘cracking job’. There are lots of Filipinos with international experience moving back to the country and, culturally, he sees a real drive to improve. Malaysia is not as exciting but Pidcock is finding a number of total return stories there.
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