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Kepler Trust Intelligence
Updated 02 Jul 2021
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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan Asia Growth & Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

UK investors have traditionally been inclined to focus their portfolios on UK and, more recently, US-listed shares. Conversely, many have steered clear of investments in emerging markets, such as those in Asia, on the perception that investing in these regions is more challenging and riskier than investing in their Western peers.

While the familiarity of the companies available in the US and UK provides comfort to investors, in an increasingly globalised economic context, avoiding exposure to Asian markets could mean missing out on potentially attractive returns.

Historically, Asian businesses have often been perceived as regional equivalents of US or UK-listed companies. However, many of the companies listed in Asia are leaders in their markets globally, meaning that investors can find quality, innovative businesses here. For example, after years of market domination by US-listed players, TikTok, with headquarters in Beijing, was the most downloaded app in the world in 2020, according to AppAnnie.

It is no surprise that Asian businesses have started to take the lead in some sectors, particularly those in emerging or rapidly-developing technologies. Tertiary (degree-level) educational attainment is world-leading in South Korea and China, while governments in many of the region’s countries have ploughed significant sums of money into incentivising and supporting technological innovation within companies and institutions.

Buying the best in Asia

As an investing region, ‘Asia’ encompasses a broad array of markets, each with different economic, governmental and cultural influences that impact their markets. As such, a presence ‘on the ground’ is crucial to effectively investing in the region, and identifying the companies truly living up to their operational promises.

JPMorgan Asia Growth & Income (JAGI) is run by two portfolio managers, Ayaz Ebrahim and Robert Lloyd, who have built a diverse portfolio of equities based on the best ideas and insights of 36 analysts covering the region.

The team invests in companies with a five-year view, which enables them to tap into improvement stories, where currently undervalued companies generating strong earnings are able to make changes that boost their valuations. One such company is TSMC.

Taiwan Semiconductor Manufacturing Company (TSMC) is a Taiwanese-listed semiconductor foundry, recently described as “a linchpin of the global economy” by the Financial Times. The company is a technical leader in its field, being one of only two operators in the world to master the technology required to manufacture three nanometre chips, the latest stage in the rapid development of the chips used in a mind-boggling range of products from phones to supercomputers.

In a world where such chips have been in such short supply that they have halted car production lines in Japan and the US, being so technologically dominant in the field has led to the company going from strength-to-strength. Indeed, the US’ leading chip manufacturer, Intel, has outsourced some of its production to TSMC.

Not only is it the global dominant player in its market, it was also one of the first emerging market companies to include the cost of carbon emissions in its financial analysis when building new foundries. Last year, it also signed a significant offshore wind power contract with Orsted. Altogether, the substantial tailwinds behind TSMC and its improving ESG credentials have more than vindicated the team’s original investment thesis. Since JAGI first invested in late 2011, the company’s share price has delivered a share price total return of 1180% in sterling terms, comfortably beating both the Taiwanese Stock Exchange and JAGI’s benchmark, the MSCI AC Asia Ex Japan Index.

Go global for growth

Far from lagging their Western peers, many Asian companies are now world-leaders in their markets. By utilising the access and depth of knowledge available to those like the team behind JPMorgan Asia Growth & Income, investors can tap into this building dominance and access valuable growth with a differentiated risk profile to US and UK-listed growth stocks.

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