Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
David Kimberley
View profile
Updated 24 Mar 2023
Save Article Download

Disclaimer

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.

In the third week of our ISA event series, we looked to Asia. From the big picture outlook for China, through to the investable opportunities in Vietnam, our speakers addressed the myths and realities of this often under-appreciated region.

Ed Butchart on emerging markets

To kick the week off we had a presentation from Kepler’s in-house manager Ed Butchart. Ed joined Kepler in 2021, having previously been chief investment officer at Sloane Robinson, and manages two emerging market funds, both of which he previously managed at Sloane Robinson.

Ed looked at the big picture for emerging markets as a whole. He started by looking at historical returns of emerging markets, versus other regions and country specific indices. Although emerging markets have been more volatile, they’ve also had periods of strong outperformance.

Ed then moved on to look at valuations in emerging markets alongside prospective earnings growth. He also looked dollar strength relative to emerging market performance, something that has come into view over the past 18 months due to the Fed’s rapid interest rate hikes. Significantly, he noted that projected growth for many emerging market countries is way ahead of the US in dollar terms.

Finally, Ed discussed some of the dynamics around commodities and then devoted some time to China, a country that has by far the largest weighting in emerging market indices.

Baillie Gifford China Growth

China is a market that stands apart from the rest of the world. Whether that is extended zero COVID, a reasserted absolutist leadership or new laws and regulations, investing in China has been challenging for the last few years.  

Baillie Gifford China investment specialist Ben Buckler joined us to discuss how Baillie Gifford China Growth (BGCG) approaches the challenge of China. Fundamentally, he said that their investment is driven by a small number of companies emerging from China, which are less impacted by domestic growth or interest rates.

Crucially, the team look to invest in disruptive, secular trends and the companies that are channeling these most effectively. As a result, Ben explained that the team’s perspective on company fundamentals can therefore be markedly different to that of the market.

Fundamentally, they are happy to accept short-term volatility on the path to long-term returns, although appreciate this can be uncomfortable for investors.

Having set the stall for the firm’s approach, Ben then discussed the landscape in China. On regulation, he remarked that we have seen a decade of unrestrained growth in the digital space in China, with very lax regulation. The team’s view is that the regulation in principle set out by the Chinese seems broadly sensible and while it may impact short-term earnings, the issues it addresses are potent, such as monopolization.

He also highlighted the growing role of private business in China, within a context where consumers are holding significant cash and interest rates remain low.

He then discussed the companies that his team have been focusing on within China. One interesting focal point was the climate leaders emerging from the country, with significant government backing turbocharging the technological development, as has been seen in other sectors previously.

Ben said: “We can see a China which is increasingly being driven by its new economy, by domestic demand – and those are the areas we’re focusing on. That opportunity does not seem to be reflected within investors’ portfolios.”

Ashoka India Equity

Ashoka India Equity (AIE) has been the top performer in its peer group since launching in 2018. It also operates with a unique fee structure. The managers receive 30% of outperformance generated, which is calculated over three-year periods, but no other management fee.

Investment director Ayush Abhijeet presented on Thursday and talked through this structure in greater detail, along with highlighting how the trust approaches markets. Notable in this regard are the trust’s valuation process and the way in which they treat corporate governance.

Moving on, Ayush looked at some of the key reasons to invest in Indian companies. Two points that stand out here are the country’s growth potential versus China, with India’s younger, growing population a key factor. The other point here is how companies in India tend to receive little research coverage. This should in theory provide greater opportunities for active managers to exploit.

Finally, Ayush ran through some of the sectoral exposure that AIE has and the opportunities that exist within them. That includes healthcare, financials, industrials and the country’s growing technology sector.

Vietnam Enterprise Investments

To finish off the week we had a presentation from Vietnam Enterprise Investments (VEIL), a country specific trust that invests in Vietnam. Manager Thao Ngo presented, alongside Dominic Scriven, the founder and chairman of Dragon Capital, the asset management group which launched VEIL.

The pair talked through what makes Vietnam an attractive proposition. They noted some of the manufacturing relocation that is happening in the country, with major companies like Apple, Nike and Intel moving production there. The managers noted, for example, that 60% of Samsung phones are now made in Vietnam and that Lego recently invested $1bn in the country to build a factory.

This partly explains why Vietnam has seen substantial GDP growth over the past three decades. That in turn has led to the creation of a wealthier middle-class, who are helping grow the country’s consumer goods and financial services industries.

Thao then looked at VEIL in some more depth, looking at the trust’s performance and some of its holdings. She also talked through the reasoning behind some of the investments the trust has made. There was also some discussion of valuations, with Thao noting that the market seems to have bottomed out in late 2022 and may be on the path to recovery.

Dominic then talked about Dragon’s offering and how the company was established in the early 1990s. He then talked through what the company is aiming to do and noted that Dragon are the largest private investor in the Vietnamese stock market.

Login to read the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.