Asia – Cover story
Medeiros believes that Asia is the place to invest in structural growth stories. Here, he notes that other regions of the world may benefit from Asia’s massive growth, as Asian countries are mostly net importers of resources. “When coupled with the energy transition, that will present good opportunities across the capital structure in different countries,” he says. Two large M&A transactions over the summer illustrate this well. Volkswagen purchasing 5% of China’s XPeng and Saudi Arabia buying 10% of Vale’s base metals business highlights that emerging markets hold the most assets and value in the electric vehicle (EV) supply chain, and trade at attractive valuations. German companies have been rapidly losing market share to Chinese EV manufacturers and appear to be under pressure from their shareholders. “The transaction may be the first of many and highlights the challenges of reducing economic exposure away from China,” Medeiros says. Lin Thurston thinks that investors should continue focusing on a bottom-up approach in the region, to identify attractive investment opportunities with a “macro and policy considera- tion overlay”.
On a more practical level, James Donald says investors should consider gaining exposure to the East, either through a regional Asian strategy, through a more diversified global emerging markets strategy, or a global equity fund.
Where’s the gold? So where are the specific institutional investment opportuni- ties in the East?
In the equity space, India and Indonesia are great places to har- vest growth, Medeiros says. He also cites Malaysia and Thai- land as interesting due to their “idiosyncratic factors”. He also lists Chinese stocks as a “value opportunity”. Whereas Taiwan and South Korea will have a significant part of the artificial intelligence supply chain with a fraction of the levels of valua- tion from companies in the West.
Lin Thurston sees consumer and technology as the key sec- tors in Asia where potential long-term investment gains can be found.
Donald also points to Indonesia’s growth prospects, which are also improving and “should not be overlooked” as it is climb- ing up the metals value chain, from mineral ores to processed metals to EV, as it is home to many of the key metals for such production, namely nickel, copper and bauxite. He also breaks down the investor attractions by region and sec- tor. In China: financials, consumer staples, healthcare and IT appeal. In Taiwan, it is IT, in South Korea: financials, consumer discretionary, communication services and consumer staples. In India, he lists energy, materials and communication services. Within Indonesia, financials, communication
services, industrials and energy standout, while energy and financials are appealing in Thailand.
Tech and growth Tom Miedema puts the Taiwan tech industry as a hugely appealing investment. “TSMC is at the centre of that,” he says. “being the global leader in semi-conductor technology.” Paulo Salazar says you cannot ignore China, with the current market scenario including new “secular growth themes” such as digital-cloud roll-out for Chinese enterprises, an advance- ment of high-end manufacturing and the integration of AI fea- tures by software and gaming leaders. Here the rising demand for AI and ChatGPT-associated pro- cessing and memory semi-conductors is set to be a tailwind for selected companies in Taiwan and South Korea, Salazar adds. And from a value chain perspective, he says multiple Asian companies are direct contributors to the AI theme’s growth and are expected to be long-term beneficiaries of the transition. For Fabiana Fedeli, there is also much for investors to look at within China. “Aside from all the macro-economic noise, we are encouraged by what is happening from a micro-economic or bottom-up perspective: a number of large Chinese compa- nies are doing a good job in terms of margins and profits, despite softer-than-desired headline growth, and we are seeing many companies returning cash to shareholders in the form of buybacks,” she says.
In its range and depth, the future of investment is clearly in the East.
We are at the beginning of an era of regional rather than global spheres of influence, which is proving beneficial for many smaller Asian nations, as well as
larger ones such as India. Will Scholes, Premier Miton
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