David Kimberley
View profile
Updated 15 Dec 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.

News that India’s stock market has overtaken Hong Kong to be the world’s seventh largest by market cap made headlines this week. That reflects increasingly positive sentiment, which Mobius Investment Trust (MMIT) manager Carlos Hardenburg highlighted at one of our events earlier this year. Carlos noted that he has been investing in India for almost three decades but has never experienced the level of optimism about the country’s prospects as he has today.

However, the country’s performance is arguably also a reflection of sentiment towards China, which has shrunk from over 40% of the MSCI Emerging Market Index in 2020 to less than 30% today. A similar phenomenon has played out in Asia ex-Japan indices. The result is that more money is likely flowing into India, in part because there may be a sense that there is a lack of opportunity elsewhere – a process that is then compounded by passive flows.

Nonetheless, Asia as a whole does continue to trade, on a price to book basis, below its own historical average. It’s worth noting that this is not the result of China’s outsized role in indices, as this holds true on a country specific basis as well, with the only exception being India.

In some ways this is surprising. Asian countries do not suffer from the same high levels of debt that much of the western world does. They have not been subject, for the most part, to the same inflationary pressures as their western peers have. And the growth opportunities are arguably more compelling than anywhere else.

As just one example, the Brookings Institute estimates that Asia’s consumer class will increase to 80% of the global total by the end of this decade, up from 50% in 2020, and only 20% at the start of the century. This is not to mention that the region contains many of the most attractive technology companies operating outside of the US.

That consumer growth and those tech opportunities also reflect the two distinct areas that are likely to attract investors in the region. On the one hand, you have large scale infrastructure growth and uptake of financials and consumer staples. Then you have more developed countries like Taiwan, South Korea, or China, where there are more opportunities in technology and consumer discretionary.

JPMorgan Asia Growth & Income’s (JAGI) current portfolio gives some indication as to where managers Ayaz Ebrahim and Robert Lloyd believe the best opportunities lie. The JAGI portfolio is currently overweight technology. Names like Samsung and TSMC are likely to be familiar to readers. However, other semiconductor players like SK Hynix and Wiwynn are also in the portfolio and supported the trust’s outperformance last year.

Ayaz and Robert have also cut back on consumer discretionary in India but are overweight to the country’s banks, as they are in Indonesia. Both countries have underpenetrated markets for financial services, meaning this is also something of a growth play.

Consumer discretionary is another sector the managers are overweight to, with notable holdings being in franchise operator Yum China and Indian automotive manufacturer Maruti Suzuki. The latter controls almost half of the market for passenger cars in India.

Risks around China clearly remain. However, with valuations having come down to more attractive levels, and the end of the rate hiking cycle in sight, it may be that Asia enjoys a better 2024. The opportunity is certainly there.

Press continue 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.