Asian equities to outperform


Leading value manager, Antipodes Partners, believes Asian stocks are primed for a long-term period of outperformance as Asia’s leading economies emerge with strength from COVID-19.

“Asia, in particular China, has emerged from COVID stronger than many major western economies, with fiscal and government debt intact,” said Antipodes Asia Fund co-portfolio manager, Sunny Bangia.

“Money creation in the western world has far outpaced Asia over the past twelve months, this is a stark contrast to the post-GFC years when China went on a debt binge.

“What’s even more encouraging is without that excessive monetary support we’re seeing strong private sector recovery across the region and this should not be ignored by investors.

“We’re quite excited now given the economic backdrop and the number of companies in the Asia region that are leading the way in terms of innovation and growth.”

Mr Bangia said amongst some of the major growth areas, investors can find opportunities in businesses exposed to advertising and social commerce and rising domestic consumption.

“COVID has given a boost to digital businesses but I think it’s important to remember where China is today in its penetration of advertising spend as a percentage of GDP. China is still way behind western markets, but we think the market is poised to grow at over 20% per annum over the next five-to-six-year period, catching up to the US by the end half of the decade.

“That provides tremendous opportunity to invest in a bunch of companies exposed to this theme across the region, not just in China.”

Mr Bangia highlighted and Tencent as compelling investment ideas.

“When it comes to domestic consumption, it’s important to remember that Chinese people are getting wealthier. The premium class of Chinese consumers are approximately the same population pool as the United States and their incomes are growing very fast at a compound annual growth rate of around 15%.

“This part of the economy is very vibrant and is becoming very large, it’s another area investors should ensure they have exposure to.”

Mr Bangia says ecommerce giant and premium alcohol manufacturer Wuliangye are examples of Chinese equities that can help provide that exposure.

“It’s important to also remember Asia can at times be volatile, so uncorrelated diversity across sectors is key when investing in Asia, as is downside protection. This is why we think a long short strategy is the most effective way to invest in the region,” added Mr Bangia.

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