Portfolios that have seen performance suffer in recent months due to various global and domestic headwinds need to keep Asia’s longer-term growth opportunities in mind.
“Asia remains an attractive market for long-term investors and the region continues to experience structural growth,” said Teera Chanpongsang, portfolio manager of Fidelity Funds – Emerging Asia Fund and Fidelity Asia Fund.
He has witnessed this first-hand, having weathered a range of crises. “I have learnt to adopt a long-term perspective towards the short-term uncertainties that weigh on investor confidence.”
In line with this, the fund house is focused on identifying stock-specific opportunities. “[They] may have suffered from short-term headwinds but offer alpha potential for disciplined investors,” added Chanpongsang.
Quality counts
This fosters an approach centred on high-quality stocks with reputed management teams, strong franchises and robust business models that underpin sustainable and improving free cash flows.
It has led to the Fidelity Asia Fund being overweight financials, particularly best-in-class, non-state owned banks.
“Our notable positions are in Indonesia and India, which are still under-penetrated markets for basic banking services, where banks play a crucial role in increasing financial inclusion,” Chanpongsang explained.
Also promising are strong franchises that have suffered due to a lack of investor confidence. The upshot is Fidelity overweighting consumer-led sectors.
On the flipside, the firm is steering away from real estate, energy and materials sectors, given what it considers to be limited structural growth opportunities.
Local preferences
Asia’s role as offering fertile hunting ground for quality-growth opportunities has been revived as most countries in the region have eased border controls – in turn enabling pent-up consumer demand to translate into economic activity.
This bodes well for Taiwanese and South Korean technology businesses, which are at the heart of the global supply chains, regardless of short-term demand uncertainty, said Chanpongsang.
Further, India and Asean retain a demographic advantage with young populations, rising incomes and acceptance of technology. “This creates a solid pathway for rising penetration of goods and services across healthcare and financials, as well as consumption-driven sectors,” he added.
Southeast Asia also stands to benefit as capacity shifts out of China, despite pressures on economic outlook subduing investor sentiment for the time being.
Even in China, which has been hit hard more recently, the government is supporting domestic economic growth via infrastructure spending and easing regulatory pressures on internet companies.
