HEAD-TO-HEAD: JP Morgan versus Matthews Asia

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INTRODUCTION

Asia seems to be coping better than other regions with the coronavirus.

China, South Korea, Taiwan, Hong Kong, Australia and New Zealand – which together represent more than 85% of the benchmark MSCI AC Asia Pacific ex Japan Index – look set to suffer less damage than many economies because of their effective social and economic responses to the Covid-19 pandemic, as Aberdeen Standard Investments argued in a recent webinar.

Yet, the underweight allocation by global mutual funds to Asia compared with MSCI benchmarks is well below the 10-year average, which is “staggering”, according to Pruksa Iamthongthong, a senior investment director at the firm.

Moreover, the region is still one of the fastest-growing, with structural growth trends that will continue to play out for years to come.

These include the region’s rising affluence that is translating into a rapid growth in premium consumption, such as education, financial services and higher quality food and beverage; the widespread adoption of digital technology that “means a bright future for gaming, the internet, fintech and tech services”; and the rise of “tech enablers” which facilitate the rollout of 5G mobile networks, big data and digital interconnectivity.

In addition, urbanisation and an infrastructure boom are could benefit property developers and materials producers, while the region is home to a diverse range of companies leading advancements in biotech and medical device technology, and Asian companies will benefit from the “going green megatrend” through the supply of renewables and batteries.

Although restrictions to freedom of movement and business activity have battered the earnings of Asian companies this year, the consensus earnings growth forecasts for 2021 have risen sharply to about 26% for companies in the MSCI AC Asia Pacific ex-Japan index.

Against this optimistic background, FSA asked Darius McDermott, managing director, Chelsea Financial Services, to compare two Asia ex-Japan products: the JP Morgan Asia Growth Fund and the Matthews Pacific Tiger Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 2 December 2020)

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