The case for setting up an Asian Strategy
Conventional economic arrangements have permitted Asian countries to emerge relatively quickly from the FC in 1997. Ever since then, they stayed away from large public debt increases. At the same time, private household savings increased well above the average of some other developed countries. These two factors meant that financial hiccups had only a minimal effect on Asia, which recovered immediately as soon as markets improved.
China has gone through an outstanding economic revolution over the past five decades, and this has triggered investment benefits across the broader region. It is apparent that the growth of a nation’s economy depends on its economic guidelines and the facilitation of an export-leaning trade. However, a major factor which is often ignored is the fact Asian populations benefit from very pro-future thinking governments, with their citizen's given leeway to experiment in all areas, provided their activities promise to somehow benefit the nation.
The US-China trade dispute is of primary concern. We believe that this is part of a broader reshuffling of global powers and that because of its strong fundamentals, Asia is most likely to emerge as the winner.
Scope of investments
Fixed Income: Returns on Investment Grade (IG) bonds in hard currencies from local debtors nearly match returns on developed markets. However, we have a constructive stance on EM corporate bonds in local currencies, which have corrected recently and now offer a good risk-return trade-off. EM real rates are now attractive enough to absorb further rate increases in major developed markets.
Equities: In the past years, Asian markets were mainly driven by large caps. While they still represent upside potential, the headroom is now limited. It is for this reason that we take a proactive view on small and mid-caps which benefit from the strong fundamentals, largely due to robust domestic demand.
