Asia markets weather politics to offer new opportunities
Robert Lloyd George is manager of the Quaero Capital’s Bamboo fund.
The prospects for earnings and economic growth in Asia remain positive for the coming year, although investors should avoid exposure to export sectors that may feel pressure from the policies of the US Trump administration.
The Indian market has now recovered from the aftermath of the sharp demonetisation announced in early November last year. Indian consumer spending and GDP growth are back on track.
Some investors took advantage of temporary weakness in the market to buy undervalued shares, especially in the banking sector, which saw strong gains in earnings from rapid deposit growth as a result of the move to a more on-line, digital financial sector.
Many more Indians now have banking accounts, boosting banks like Yes Bank and HDFC Bank as well as ICICI.
Companies like India’s Make My Trip, the leading online travel advisory concern in the sub-continent, and mid-cap stocks such as healthcare companies Cadila and Cipla have also been added to the portfolio. In the automobile sector, Force Motors, Atul Auto, and Castrol India are favoured.
The manager takes a more nuanced approach to China, focusing on healthcare, technology, internet, and consumer stocks, and avoiding banks and industrials. Hong Kong is feeling some pressure with the Hong Kong dollar/US dollar link not helping its competitive position. Nevertheless, there are great groups, such as AIA and Dairy Farm, which have regional business and are listed in Hong Kong.
Other well supported stocks include Alibaba and Baidu, leading Chinese e-commerce and on line search companies respectively, and Sunny Optical, a Hong Kong-listed technology company.
Elsewhere in Asia, the Indonesian market remains affected by concerns about political instability, but Malaysia, which is perhaps the region’s most depressed market after both political and economic headwinds in 2016, now looks promising.
This year could also be much more interesting for the Japanese share market. With the yen now trading at below 110, Japanese exports are extremely competitive, and reflation will benefit Japan more than any other economy.