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Darius McDermott, Chelsea Financial Services
So far, the US equity market has outperformed the rest of the world, with the S&P 500 returning 10.59% on a year-to-date basis compared with the MSCI ACWI’s returns of 8.71%, according to FE Fundinfo.
Meanwhile, the Asia market has lagged, performing only 4.59%.
However, the outlook should still be positive for Asia equities, as the asset class tend to benefit during a strong economic recovery, according to David Han, portfolio manager at Principal Global investors.
“The US market outperformed, helped by a superior vaccine rollout and a strong US dollar,” Han said in a note.
“Asia does have the potential to outperform for the rest of the year as Asia and emerging equity tends to do well during a strong global economic recovery, although the pace of successful vaccine rollout could have a dominant impact in 2021, likely making performance vary from country to country by notable margin within the region,” he said.
Vincent Mortier, deputy group chief investment officer at Amundi, also believes that Asia should do well this year.
“In equities, continue to play the rotation towards value and cyclicals. With regard to emerging market equities, Asia remains the key area to play cyclicality,” he said in a report.
However, not all sectors in the market are expected to outperform, noted Patrik Schowitz, JP Morgan Asset Management’s global multi-asset strategist.
“The Asian equity market is dominated by growth/tech names these days, while we are likely to see further rotation into value names as global economic growth accelerates and bond yields rise further,” Schowitz said in a note.
Schowitz also expects the US dollar to strengthen in the near term, which is generally a headwind to emerging Asia.
Against this backdrop, FSA asked Darius McDermott, managing director at Chelsea Financial Services, to compare two Asia-Pacific (ex-Japan) equity products, and he chose the Alquity Asia Fund and the T Rowe Price Asian Opportunities Equity Fund.
|Alquity||T Rowe Price|
|Manager||Mike Sell||Eric Moffett|
|Three-year cumulative return||7.09%||46.33%|
|Three-year annualised return||2.22%||13.99%|
|Three-year annualised alpha||-5.76||4.07|
|Three-year annualised volatility||18.54||19.32|
|Morningstar analyst rating||Negative||Silver|
|Morningstar star rating||*||****|
|FE Crown fund rating||*||–|
|Benchmark||No benchmark||MSCI AC Asia ex Japan Index|
Source: FE Fundinfo, Morningstar Direct