An emphasis on risk as well as reward is key to delivering sustained absolute and relative returns ...
An emphasis on risk as well as reward is key to delivering sustained absolute and relative returns in Asia, according to David Gait, a senior analyst at First State Investments.
'Asian equities offer many attractions on a relative and absolute basis but are also volatile and risky,' he said.
Gait feels it is not a case of being risk averse but rather risk aware, as Asian markets are more prone to overheating and are more often a case of feast or famine than more developed markets.
'Asian markets are immature, they lack breadth and depth and depend on short-term foreign capital,' he added. 'Many are dominated by local, story-driven retail investors, which makes it essential to lock in gains in good years,'
Finding good management is a key component of Gait's strategy for controlling risks.
'Finding quality companies is important at all times but especially so in difficult times for the market and with the weak position of many outside investors in Asian companies,' he said.
'Unlike in the US, where most companies have 90% free floats, many Asian companies have a dominant family, government or other shareholder and minority shareholders can be at the mercy of this controlling influence.'
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