Legg Mason's Asia ex Japan fund manager Curtis Butler's advice to investors in the region is to focus on stock selection and not be distracted by market volatility.
His decision to play the domestic consumption and infrastructure spending stories has paid dividend for the fund which has consistently outperformed its benchmark MSCI AC Asia Ex Japan index, including over the last quarter.
“Domestic consumption in China and Korea will be a very good source of further performance and good earnings growth,” Butler says.
“We also like transportation, including shipping, and infrastructure spending in Asia. Transportation and infrastructure is a global trade and Asia is at the forefront of the industry. We are also playing the Olymics through infrastructure investments although we do not have a specific play on the event.”
When it comes to the banking sector, Butler is at the limit of the fund’s underweight and the stocks he is buying are the outperformers.
“We are also underweight Taiwan as there has been the biggest hollowing out in favour of mainland China and a real lack of confidence locally in economy and politics.”
Butler’s investment process, developed by Boston-based Batterymarch Financial Management which runs the fund, is a combination of fundamental analysis and quantitative techniques. This allows him to filter thousands of stocks to construct a 120 holding portfolio. The fund is well diversified with small and mid cap names performing particularly strongly.IFAonline
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