How appealing are Asian stocks? |
Tweet | ![]() |
<p><strong>Glenn Freeman</strong>: In this edition of "Ask the Expert" I'm speaking with Robert Mann, Head of Asian Equity and Peter Monson who is a Portfolio Manager also in Nikko Asset Management.</p>
<p>Robert, let's kick off with you. How bullish are investors on Asian stocks at the moment?</p>
<p><strong>Robert Mann</strong>: Yeah, it's an interesting question, because to me a bit surprisingly foreign investors don't seem to be that bullish. There're been quite large withdrawals from Asia sort of around the peak coronavirus worries and since then we really haven't seen very much money come back into Asia. And then, I guess, why do I say surprising, well, I think there's a number of reasons.</p>
<p>First of all, Asia has done a really good job at combating the virus whether it's China, Hong Kong, Taiwan, Vietnam, Thailand, obviously Australia and New Zealand as well. So, the bulk of the region has done a really good job. Secondly, it's interesting that it's a region where in general people don't mind wearing masks where people do as they told and where people probably don't shake hands or touch each other as much. So, maybe it's something there which reduces the chance of a second wave. Thirdly, I think there's a lot of trust in the government. Governments have done a good job. So, people trust the governments and to getting economies going promptly, you need trust because you need to do the CapEx to buy the big – to make the decisions about the future and I think trust in governments in Asia is actually very strong. Balance sheets are strong in the region.</p>
<p>People talk about deglobalization as one of the topics. But what's interesting about COVID is that it hit services and then your hard hit areas are obviously tourism, but it's food and beverage and those sorts of things. And apart from a small number of countries in Asia like Thailand, Asia is an exporter of goods not of services. And as we all know now, we're stuck at home; we're probably buying more goods as we are spending less on services. So, the net impact on Asia is actually not (large) either.</p>
<p>So, within the region, governments have got pretty strong balance sheets. So, they can spend more money and monetary policy unlike the west which is sort of at max and can't do much more, there's still room to cut rates here. Chinese rates, while historically looked low, but in a global sense actually looked quite high. So, there's a number of reasons why Asia should have done better and why there should be more interest. But obviously, at least to-date, that hasn't happened.</p>
<p><strong>Freeman</strong>: Does the political uncertainty between Hong Kong and China affect investor appetite and likewise between U.S. and China and other countries?</p>
<p><strong>Mann</strong>: Yes, obviously, there's a whole lot of issues tied in there together. So, it seems to me – let's say, it looks pretty clear that Trump does want phase one of the trade deal to stand. So, what would I observe is that that deal still seems to be on which takes some of the extreme risk away. The Hong Kong law, it's obviously been on the front page for a while. When things are on the front page of the paper, normally it's already incorporated into share prices, which is our view. China clearly has thought hard about this. They've made the decision that some security on the ground and stopping protests is really important to them and they're prepared to risk some U.S. retaliation.</p>
<p>Now, exactly what the response will be, we just don't know. A lot probably depends on how bad are the demonstrations. Are the demonstrations – how the police retaliates et cetera. So, it's still early. But I'd would have thought that if anything that the security will be tougher in Hong Kong. There will be less demonstration, therefore, there's less sort of trigger for the U.S. to retaliate and that the really extreme retaliations, which we're not expecting, hurt Hong Kong a lot more than China. So, in general, we don't regard this as a negative for the market in Hong Kong in the short term. The one thing that it probably does do is speed up the move back or the de-listing from the U.S. markets of the ADRs which was already happening. But once again, we don't think that's a negative for the Hong Kong market as such and actually may even help some Hong Kong companies.</p>
<p><strong>Freeman</strong>: Peter, if I can turn to you for a moment, your Asian fund holds between 40 and 60 stocks. How is this portfolio positioned now compared to how that might have been three to four months ago?</p>
<p><strong>Peter Monson</strong>: Sure, Glenn. Well, the overall number of stocks probably hasn't changed too much. But the composition has obviously changed quite a bit because the pandemic really was an unprecedented and systemic change for a number of industries and countries. So, a few examples of things we did – so, we offloaded tourism and energy. Tourism, we think, particularly sort of outbound tourism is one sector that's probably really structurally compromised for quite some time. Energy likewise just a big demand drop and a lot of geopolitical risk also happening in that market. So, it's not something that we deem (indiscernible) being in. And we kind of use the opportunity – there was a real sort of panic sell-off kind of in March to add some really high-quality names in the portfolio. But particularly, in areas like healthcare, digital consumer or digital discretionary and some really high-quality financials, a couple of which are based in Hong Kong.</p>
<p><strong>Freeman</strong>: And just in terms of the country breakdown?</p>
<p><strong>Monson</strong>: So, in terms of the country breakdown, obviously, this was another area that we really evaluated during the downturn. As Rob has discussed, some countries have dealt with this far better than others and some are equipped with sovereign balance sheets and healthcare infrastructure to deal with it far better. So, we really prioritized allocating towards those countries and de-risking from perhaps some of the more emerging countries for having a lot more issues with lockdowns and with the spread of the virus.</p>
<p><strong>Freeman</strong>: Sure. And just finally, I'm not sure probably either of you could jump in on this one. But how reliable is the data that we get about Chinese companies, say, now versus in the past? I know especially for investors that are in Australia and other markets outside that region it's always been a concern.</p>
<p><strong>Monson</strong>: Yeah, I'll take that, Glenn. So, I think it's improving with more coverage engagement and scrutiny. Obviously, the opening of A-share markets has been a real significant event for us</p>

16/04/2021 Amazon.com and ServiceNow are looking increasingly attractive.

15/04/2021 Investment tips from Australian equities fund manager Kate Howitt.

14/04/2021 What is income investing, why is it important and which investors should focus on it? Morningstar Investment Management's Dan Kemp has the answers.

13/04/2021 Morningstar equity strategist Gareth James discusses the great value rotation, why he believes the Australian share market is overvalued and where opportunities still lie for hungry investors.

12/04/2021 But the sector's current tailwinds are likely unsustainable, so investors should prioritise high-quality businesses with stable balance sheets, says Morningstar's Dave Meats.

08/04/2021 Kate Howitt oversees Fidelity’s Australian Opportunities fund. She discusses her investing approach, the outlook and where she sees value.

07/04/2021 Goldman Sachs's Laura Destribats talks about the millennial investment trend, and why tech and experiences are so important to this generation.

06/04/2021 Remember that the returns on speculative assets like Bitcoin are high risk

01/04/2021 Steve Johnson explains why Forager Funds Management has bought and held Enero, SG Fleet and Zebra Technologies and why they're poised for further growth.

30/03/2021 Forager's Steve Johnson explains why he's bullish on consumer spending, enterprise software companies, and why he has cashed in on big names like Uber.

29/03/2021 Kristiaan Rehder explains why the West Australian biotech is among the top performers in the Bennelong Kardinia Capital Absolute Return Fund.

26/03/2021 And how to make inflation "personal."

25/03/2021 The how, what, and why of cryptocurrency.

24/03/2021 An absolute return fund aims to seek returns in all weather. Kristiaan Rehder from Bennelong Kardinia Capital explains how.

23/03/2021 Diversified portfolios, strong balance sheets and healthy payouts. Grant Berry singles out three big contributors to the SG Hiscock Property Income Fund.

22/03/2021 SG Hiscock's Grant Berry explains how real estate was affected by the pandemic, how property stocks coped, and the chase for income in an evolving retail landscape.

19/03/2021 Video gaming has soared under lockdown, can this sector keep growing post-covid? Morningstar analyst Neil Macker takes a look.

18/03/2021 The retail giant's strong balance sheet will help it navigate the shift to online shopping and capitalise on the return to normal life, says Morningstar's Johannes Faul.

10/03/2021 Ahead of Deliveroo's IPO, Morningstar analyst Ioannis Pontikis looks at the outlook for the business, its valuation and concerns about gig workers.

08/03/2021 E-learning has become the norm for young students and university-goers across the world. Morningstar analyst Michael Field looks at whether the trend is here to stay.

04/03/2021 Special guest Peter Warnes, our head of equities research, joins the Morningstar Foundations of Investing Webinar series to give his unique take on February Reporting Season and answer subscriber questions.

03/03/2021 The growth and adoption of exchange-traded funds has only accelerated as a result of the latest market crisis.

01/03/2021 Morningstar's Nathan Zaia on the outlook for the banks, dividend payouts and the move by the Bank of Queensland to acquire ME Bank.

25/02/2021 The biggest takeaway from that period is not to panic when the market tumbles.

23/02/2021 From ETFs backed by bullion to miners with more upside potential - here's how to get yourself some gold.

23/02/2021 If the US is to stage a recovery by mid-year, it will need the consumer services sector to fire, says Morningstar's head of economic research Preston Caldwell.

19/02/2021 Morningstar's Brian Han weighs up News Corp's deal with Google and examines the effect of Facebook's decision to block content from Australian media outlets.

18/02/2021 Quay Global Investors' Chris Bedingfield explains how self-storage, data centres and industrial property can offer diversification and growth.

16/02/2021 Uniti Group and Nextdc are among the companies that SG Hiscock's Hamish Tadgell says have flourished during the pandemic.

15/02/2021 Hamish Tadgell of SG Hiscock explains the portfolio changes he’s made in a bid to capitalise on the shift.

10/02/2021 Which pandemic-related trends have already passed, and which ones might be around the corner?

05/02/2021 The battle between the Reddit army and hedge funds is nothing new—the question is will regulators be willing to step in, says Morningstar's John Rekenthaler.

03/02/2021 Competition is fierce for fast fashion retailers such as Asos, H&M, Zalando and Inditex. Morningstar analyst Jelena Sokolova takes a look at the sector.

01/02/2021 Volatility can be around any corner, says Morningstar director of personal finance Christine Benz.

28/01/2021 Retirees require stocks' growth potential, but they need a cash and bond buffer, too.

27/01/2021 Rebecca Jiang, manager of the JPMorgan China Growth & Income Trust, looks at why Chinese stocks soared in 2020 and whether the trend can continue.

25/01/2021 Redpoint's chief executive and portfolio manager Max Cappetta tells Lex Hall why he's got his eye on JB Hi-Fi, Goodman and Reliance Worldwide in 2021.

21/01/2021 Redpoint CEO and portfolio manager Max Cappetta looks at the dividend potential of large-cap names, the resilience of Qantas, and the local tech landscape.

19/01/2021 Stocks still look cheap across all subsectors, especially oilfield services and refining, says Morningstar analyst Dave Meats.

19/01/2021 What are the rewards and risks of using this technology?

15/01/2021 Morningstar's head of policy research Aron Szapiro explains what sort of changes a Biden government will make and how they will affect company valuations.

14/01/2021 Freight-rail, building temperature efficiency, and carmaking are among the sectors Aviva Investors' Jaime Ramos Martin has his eye on.

13/01/2021 Dividend investors had a hard time in 2020, but Morningstar analyst Dan Lefkovitz think the outlook is brighter for the year ahead.

11/01/2021 Morningstar Investment Management's Dan Kemp reveals the three investment themes on his mind for the year ahead.

06/01/2021 Morningstar equity analyst Allen Good looks at the prospects for oil and gas giants in the year ahead.

05/01/2021 China had a strong year after a rocky start, but can it continue—and what does a US President Biden mean for the region? Morningstar analyst Lorraine Tan explains.

04/01/2021 Morningstar equity director Alex Morozov considers the outlook for tech, travel and beyond for the year ahead.

01/01/2021 How to plan for things you can't plan.

25/12/2020 2020: we look back at the highs and lows of an unprecedented year in financial markets and explore the themes shaping 2021.

22/12/2020 Music streaming companies have seen stellar growth in user numbers. We ask Morningstar equity analyst Neil Macker if the trend can continue.

21/12/2020 While it stands as the largest addition in the index's history, this likely won't impact everyday investors all that much.

18/12/2020 Will there be opportunities to deploy cash in the new year? Will there be a reprieve from covid? And what will the incoming Biden administration mean for markets?

18/12/2020 Companies that specialise in solar, building efficiency and renewables underpin Aviva Investors' Climate Transition Global Equity Fund, says Jaime Ramos Martin.

16/12/2020 Why does liquidity matter to investors, and how can it affect your returns? Morningstar equities director Tom Whitelaw explains.

14/12/2020 Learn what we look for when rating a company.

14/12/2020 Morningstar's new approach unpacks the environmental, social and governance risks that companies face.

10/12/2020 Industrial companies typically generate better cash flows and can offer a steady income stream, says the IML founder.

09/12/2020 The lofty valuations of Tesla and Afterpay typify the effervescence and speculation in the market, says the IML founder.

08/12/2020 Car makers may not be an obvious investment choice for ESG-conscious investors, but Morningstar analyst Tancrede Fulop says some of the largest companies score highly in some measures such as safety and human capital.

07/12/2020 Janus Henderson's Matt Peron considers how the relationship between the US and China will evolve under a President Biden.

04/12/2020 What is active investing, and what is passive investing? We're at the whiteboard to explain the pros and cons of each

04/12/2020 Treasury Wine Estates remains an undervalued stock in spite of China's demand-destroying tariff on Australian wine. Morningstar director of equity research Adam Fleck explains why.

03/12/2020 And do any other assets currently compare?

02/12/2020 We're at an inflection point in ESG investing, says Sustainalytics founder Michael Jantzi. Here's why.

01/12/2020 Beaten-down travel stocks and BNPL providers featured heavily, says nabtrade’s Gemma Dale.

30/11/2020 Many people were waiting for the opportunity to buy shares at historic discounts, says nabtrade’s Gemma Dale.

27/11/2020 The 171-year-old wealth manager has had its scandals but there's merit to its turnaround strategy and the quality of its other assets, says Morningstar's Shaun Ler.

27/11/2020 BNPL products such as Zip Co help boost consumer spending but they come with risks and are overvalued, says Morningstar analyst Shaun Ler.

26/11/2020 The Magellan co-founder argues the ecommerce acceleration is here to stay and ponders the effect it will have on other sectors such as travel and commercial real estate.

25/11/2020 Greg Dean of Cambridge Global Asset Management explains why the consumer services sector has yielded healthy returns.

25/11/2020 Magellan's co-founder explains which tech behemoth the Magellan Global Fund no longer owns, why one was too tricky to value, and why regulation is no threat.

24/11/2020 Magellan's co-founder on why 2020 resembles 2000 and why covid-19 is a dry run for something that could be much worse without proper planning.

23/11/2020 Their shares have gotten hammered this year. Are they opportunities or value traps?

20/11/2020 Our new rating highlights the degree to which a fund or asset manager considers environmental, social, and governance issues.

19/11/2020 Morningstar's Grant Kennaway explains why sustainable funds are increasingly popular and why they're performing well.

17/11/2020 Morningstar director of equity research Johannes Faul looks at home improvement retailer Bunnings.

16/11/2020 From climate change to workers' rights, ESG is a big part of the investing world. We're at the Morningstar whiteboard board to explain what it means and why it matters.

12/11/2020 We're not out of the woods yet, says our head of equity research, as he looks for safety in businesses we can't live without and shies away from the banks.

11/11/2020 Perhaps it is time to have exposure to this economic powerhouse and its 1.4 billion population, says Morningstar's Peter Warnes.

10/11/2020 What happens when you buy something when your bank card? Morningstar analyst Niklas Kammer explains which companies are benefiting from your transaction.

09/11/2020 With travel bans and economic lockdowns, the luxury sector has been hit hard in 2020. But there are still opportunities, says Morningstar analyst Jelena Sokolova.

05/11/2020 A discussion of taxes, stimulus, regulation, and the likely market reaction as results from the 2020 poll come in.

03/11/2020 Why you should resist the urge to make predictions when there's a disconnect between the economy and security prices.

02/11/2020 Etoro analyst Josh Gilbert shares his thoughts on Beyond Meat and two other companies making inroads into the plant-based meat sector.

30/10/2020 The Magellan rainmaker explains why he doubts the Republican leader will prevail and why investors should brace for volatility—and ignore it.

29/10/2020 The market for plant-based meat is worth $14bn today and is expected to grow massively, says eToro's Josh Gilbert.

28/10/2020 Morningstar equity analyst Johannes Faul explores the flipside to the surge in growth in online sales.

22/10/2020 China and Hong Kong have been a happy hunting ground, says Longlead Capital Partners' co-founder Andrew West, who singles out tech, pharmaceuticals and power tools.

22/10/2020 These names stand to benefit from a resumption of leisure travel - and are all trading below our fair value estimates.

20/10/2020 Morningstar's Mark Preskett looks at three reasons why bonds are an important tool in your investment portfolio.

19/10/2020 A bigger stake in the online conveyancer PEXA could be the key to increasing Link Administration's revenue, says Morningstar's Gareth James.

16/10/2020 Longlead Capital Partners co-founder Andrew West reveals how his Asia-focused fund managed to make gains during the historic covid-19 sell-off.

16/10/2020 The investment board is back with an explainer on why you might invest in bonds.

13/10/2020 How to handle this decision—even when it is made for you.

12/10/2020 Nick Griffin of Munro Partners reveals why and where he sees opportunities in renewable energy, diagnostics and software.

09/10/2020 Take stock of your spending to determine if inflation is an issue for you.

09/10/2020 Morningstar analyst Chelsey Tam explains why investors are excited about the flotation of Ant Group and why it's different from Alibaba.

06/10/2020 Companies that address the growing demand for decarbonisation will have a 20-year growth opportunity, says Nick Griffin of Munro Partners.

30/09/2020 EXCLUSIVE EXTRACT: Morningstar's Mat Hodge and Lex Hall talk to the CEO of the independent producer and exporter about the company's fortunes and its future.

30/09/2020 Slow and steady wins the financial race.