Many Asian markets make a compelling case for investment as growth prospects remain good and valuations have come back in an attractive zone, said Rountree in a recent interview with the Fund Selector Asia.
Eastspring has taken exposure to cyclical stocks in most of its Asian funds including its China fund, explained Rountree.
“Exposure to cyclical (companies) is highest in our China fund compared to our competitors. In terms of P/E (price-to-earning) and also P/B (price-to-book), our fund is the cheapest. So, when you are buying this fund, you are buying cheap cyclicals with good dividend yields. Virtually, in all our funds we are very exposed to cylicals within Asia.”
The Luxembourg-domiciled Eastspring Investment China Equity Fund with March-end assets worth $371m invested nearly 22.9% of its corpus in basic materials sector, making it as its second preferred sector bet. Financial sector enjoyed the highest weighting of 38.4%.
Rountree wants to play on the consumer story in its various forms, be banks or select consumer discretionary stocks.
In emerging Asia, cyclicals, industrial, and materials sectors looks fairly valued. The valuation of consumer discretionary stocks that is supposed to be major beneficiary of the reform process in China is still low, he said.
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Asia, Emerging Vs developed markets
Rountree says emerging Asia is in a “sweet spot” and foresees investment opportunities in markets that have come in attractive zone.
“I wanted to start the year with being more aggressive on a switch back to Asian markets (from developed markets), but I cannot run too far ahead of the fund managers. Emerging market growth is increasing and their valuations are very cheap. So, where will I go? It is no brainer.”
China and Korea are cheap in terms of valuations, while Indian equities in staging back at fair value levels, he said, adding he sees tremendous value in Japan.
“Japan should have a place in your portfolio, but you have to be patient. The risk is people will link the success and changes in corporate Japan to Abenomics.”
In terms of valuations, he believes US is fairly valued and the fund house is underweight US equities, and is instead playing the US high yield theme and reducing its overweight position in Europe.
“Do you feel Europe is so strong? It does not look like. We still remain overweight, but it is in very select markets like Italy, Spain, and some peripheral parts. Russia is one of the cheapest markets, but we do not have positions there for obvious reasons. When we look at Europe, its difficult to spot convincing ideas there.”
Personal Investments, Advice
He advocates investors with a low risk appetite to opt for equity income fund while those with higher risk appetite can opt for cheap markets in Asia, and multi- asset class for those with higher risk appetite.
“This time last year and a year before, it was clearly income story. The income story is still there. Income story is not over, as liquidity is high and interest rates low.”
Personally, Rountree doesn’t have exposure to U.S. equities, and is looking out to sell investments in European fund. He holds Eastspring’s Japan fund, Emerging Asian Equity Income Fund, Asian Local Fund in his portfolio along with one Greater China fund from its competitors.
“I already made my money out of Europe,” he says as he looks confident on his bets on Asia story.
