By comparison, the JP Morgan team assumes that stocks that are underperforming could perform well in the future. The team, led by Howard Wang, adopts a contrarian approach when selecting stocks. They prefer companies that are out-of-favour, but still retain core competencies and are expected to post a turnaround performance within 12 months.
Wang concentrates on three regions: China, Hong Kong and Taiwan. The team uses different approaches in each region. For China, the team uses a combination of the top-down and the bottom-up approach. In the case of Hong Kong, Wang leans solely on the top-down approach while for Taiwan, he uses the bottom-up approach.
“For Hong Kong, the financial market is matured and listed stocks can be affected by macroeconomic factors. In this case, a top-down approach works better. For Taiwan, the team conducts a lot more ground research, as there are many more small-cap companies that offer value. The underlying fundamentals of these companies drive performance, not macroeconomic factors. In the case of China, a mixed approach is needed as Chinese companies are affected by both macroeconomic factors and the central government’s policies,” Ng explained.
The JP Morgan fund, which usually holds 50-70 stocks, is less concentrated than Invesco’s. In addition, its sector focus is different. Wang prefers financials and industrials as opposed to consumer-based sectors.
A snapshot of portfolio allocation:
