Among the 313 SFC-authorised equity mutual funds with at least 90% of their assets invested in the region (plus Japan), four of the ten poorest performers are Indonesian funds, while three of them are focused on India.
Bottom performers – Asia incl Japan
Source: FE Analytics. All fund NAVs converted to US dollars. Includes regional and single-country funds and excludes passive products.
Japan funds shine
On the flipside, four of the top 10 best performing funds are Japan-focused funds, while others focus on the Hong Kong, Taiwan and China markets, FE data shows.
Top performers – Asia incl Japan
Source: FE Analytics. All fund NAVs converted to US dollars.
However, the four Japan funds have very different characteristics. For example, the Invesco fund has the majority of its portfolio in small- and medium-cap companies, while the First State fund has mostly medium- and large-cap companies, according to data from Morningstar.
Both JP Morgan funds, which are managed by the same portfolio managers, are mostly focused on large-cap companies.
There are also huge differences in sector weightings, according to data from FE Analytics.
Sector weight (%)
Source: FE Analytics
The industry has mixed views on Japanese equities. For example, Roger Bacon, head of investments for Asia-Pacific, favours the asset class, while Kevin Anderson, State Street Global Advisors’ head of investments for Asia-Pacific, has reduced position in Japan.
Not all Japan-focused equity funds performed well this year. Only nine funds that invest in the asset class, including the four in the top 10, returned positively, while 33 had negative returns.
Out of the 313 funds analysed, only 41 funds had positive returns year-to-date. Most of them are Greater China funds, according to FE data.
Tough year for Asia equities
Among the 313 funds that invest in Asia incl-Japan, 272 or 86% have performed negatively year-to-date, according to FE data. Among those funds, 190 products underperformed the MSCI All Country Asia-Pacific Index.
All major MSCI single-country indices in the region have been so far in the red.
Source: FE Analytics
The Indonesian and Philippine equity markets were the worst performers due largely to the appreciation of the US dollar, said Raymond Chan, Allianz Global Investors’ chief investment officer for Asia-Pacific equities.
He explained that countries that are experiencing large current account deficits are more vulnerable to the appreciation of the US dollar.
Source: Allianz Global Investors
UBS Wealth Management, State Street Global Advisors and Eastspring Investments have also taken note of the strengthening dollar, which has led to changes in their tactical asset allocation.