Investment companies buying in the Asia Pacific region are recording strong growth, with those excluding Japanese stocks up 27% in the last year compared to the overall 18% average industry increase.
For those including Japanese stock the figure is lower, but still above the average at 19%.
The sector is also experiencing hefty discount widening; the excluding Japan market is up from 5.3% last year, to 9% at the end of May while including Japan is up from 7.1% to 10.7%.
Martin Currie Pacific trust manager John Millar says it is an exciting time for Asia.
“Our portfolio is currently biased in favour of growth companies, with particular concentration in Hong Kong, Korea and Malaysia,” he says.
Millar invests in Japan, but has dropped his holdings in the region from almost 55% 18 months ago, to about 30% today.
“In Japan prospects in the medium to long term are clearly less good than the rest of Asia,” Millar says.
“But the level of growth elsewhere in the region still offers good opportunities for Japanese companies, many of which are very well-placed to benefit.”
However, Schroder Asia Pacific trust manager Matthew Dobbs says he excludes Japan from his portfolio, as it doesn’t offer the best value in the region.
He also feels risks for Asia lie principally outside the region itself, such as US interest rates.
“Assuming no exogenous shocks, the conditions are in place for the region’s economies to continue to grow above the global average, and for Asian stock markets to generate attractive returns,” Dobbs says.
Corporate governance, often perceived as a weakness in Asia, was one area Dobbs says has improved.
China was an area both managers feel has enormous opportunities. Dobbs says the country has a powerful domestic growth dynamic and believes much of the skepticism surrounding it is unfounded.
Millar adds: “While valuations there look stretched by comparison with recent history, earnings growth has come through very strongly to provide support.”
“The equity markets have been driven by huge amounts of domestic liquidity; while this is around we do not foresee a sharp decline in the market.”
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