Jun Bei Liu

Lonsec has rated the Ten Cap Alpha Plus Fund Complex ETF ‘Recommended’, citing confidence in the ETF’s underlying investment process and portfolio management ownership.

In its rating report Lonsec said lead portfolio manager Jun Bei Liu is a capable investor and has taken full ownership of the implementation of the Fund’s longstanding investment process.

“Liu brings a differentiated perspective to the process reflecting her cultural background and investment experience, with stock insights and portfolio management skill, including shorting, deemed to be strong. Liu’s two supporting investment analysts are considered to be quite capable and are adequately experienced, with an additional experienced dealing resource. The centralised team is aided by a collegiate structure and facilitates research collaboration.

“The Fund’s investment process is considered differentiated and delivers an intuitively appealing blend of fundamental long/short investing and usage of quantitative approaches to aid risk management,” Lonsec said.

Liu said: “We are focused on generating exceptional returns for investors by managing a long, short equity strategy that profits from stocks going up and down in the Australian market.

“The Recommended rating is a testament to the whole investment team’s efforts in executing the investment process to outperform the benchmark and deliver alpha to our investors.”

Jason Todd, CIO and co-founder, added: “Tcap was launched to make an institutional grade product available to a new set of investors. ETFs are a great vehicle for retail investors, offering affordable portfolio access.

“This rating reflects the confidence in Jun Bei, the investment team and investment process, and is an excellent outcome so soon after its listing,” he said.

Tcap (ASX: TCAP) was listed on the Australian Securities Exchange on 24 November.

Tcap’s underlying strategy is based on the firm’s long-standing investment offering, Alpha Plus, which is one of the longest running and most consistently performing long short equity only funds in Australia. Becore the launch of Tcap the strategy was only available to institutional investors.

The underlying strategy, the Alpha Plus fund, has returned 12.45 per cent a year since inception, outperforming the ASX200 index by 2.87 per cent.

Since taking over as manager of the fund in 2019, Ms Liu has delivered a return of 12.9 per cent a year compared to the ASX200 of 9.9 per cent – an annualised (net) outperformance of 298bps.

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Jason Todd

As the global economy balances optimism and risk, Ten Cap is approaching 2026 with confidence, noting underlying fragility remains due to lingering tariff concerns and rising imbalances as a result of the impact of artificial intelligence (AI) and technology.

Jason Todd, founder and CEO, says overall Ten Cap holds a glass half full view where economic growth consolidates around trend, before picking up deep into 2026 / early 2027 as the drags of the first half of the year diminish.

He says fears of an AI bubble and an unwind are overplayed, as AI-driven capital expenditure will reshape growth.

“At this stage, we see no accelerants that would turn selected weakness into systemic concerns for the US or the global economy.

“Continued investment in AI and technology will boost corporate capital expenditure, offsetting weaknesses in the US labour market and supporting global expansion,” he says.

But he says markets will see a patchwork recovery, rather than a synchronised boom.

“We expect advanced economies to slow, and emerging markets to see minor upside. But the recovery will be uneven and regionally divergent.

“Unlike many, we don’t see China disappointing, although neither do we see the potential for policy support to drive (sequentially) higher growth.”

He says central banks will continue to ease cautiously.

“The majority of policy support is already in place, but further rate cuts will continue into 2026. The central banks in the US, Europe, and the UK are likely to cut rates modestly, while Japan normalises slowly.

“China will use targeted fiscal and monetary measures to stabilise growth, as it battles structural drags from the property sector.”

But he says there are economic risks to the upside.

“Expectations for growth have been consistently exceeded through 2025 as trade uncertainty has not translated into meaningfully higher inflation or a supply shock. It has taken most market participants too long to recognise this. We don’t see AI capital expenditure slowing and we think policy support should gradually lift consumer spending and activity levels across developed economies,” says Todd.

Ten Cap’s lead portfolio manager, Jun Bei Liu, says in this environment she expects equities to surprise on the upside.

Solid gains are likely for global equity markets, which Liu says will be led again by the US where the rally will continue to broaden out with high quality tech and growth stocks remaining supportive off the back of a strong earnings outlook.

“We do not think the year will be characterised by the need to be overly defensive or to favour large liquid stocks over small and mid-cap cyclicals.

“A solid economic backdrop, slightly lower policy rates, and a recovering consumer and structural thematic are all positive drivers – offset only by valuation concerns.

“However, liquidity conditions will remain strong, risk-taking behaviour will continue and investors will not chase private markets at the expense of public markets because of value.”

She says it will be another solid year for Australia equities, and she expects the market to outshine dull expectations again.

“Australia’s economy is expected to grow around trend in 2026, supported by solid fundamentals such as steady labour income, strong immigration, and improving global conditions. However, the removal of the RBA’s easing bias will soften momentum, with two rate cuts likely, but not until late 2026.

“Fiscal policy remains supportive but is shifting toward revenue reform, which could introduce volatility for certain sectors.

“We think the Australian market will exceed the current “trend / on the fence” expectations of 7-to-10 per cent, underpinned by an improved earnings outlook and earnings-per-share (EPS) growth of 8-to-10 per cent, as well as a further “re-rating” rather than “de-rating” of price earnings (PE) multiples.

“A broad improvement in domestic macroeconomic conditions, particularly the consumer sector, will keep the equity market well supported even though valuation optics will look expensive.

“We doubt PE multiples will move lower outside of a global shock or a liquidity unwind. Fears of an overvalued market are exaggerated and comparisons to the long term historic average are not relevant.”

She adds growth stocks are a structural part of every portfolio, and she expects growth stocks to perform well into 2026 outside of any higher domestic policy rate increases, which are unlikely.

“We expect cyclical and consumer improvement, which means mid-and-small-caps will have another strong year, outperforming large caps (ex-materials).

“Energy stocks will be the sleeper in 2026,” Liu concludes.

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Jun Bei Liu

Ten Cap has listed its first active ETF, Tcap (ASX: TCAP), on the Australian Securities Exchange (ASX) today. 

Tcap is an Australia only long-short active extension strategy. Its underlying strategy is based on Ten Cap’s long-standing investment offering, Alpha Plus. 

Until now the strategy has only been available to institutional and advised investors, and Ten Cap co-founder and lead portfolio manager, Jun Bei Liu, says the firm wanted to expand the strategy’s availability into the broader retail market.

“This is one of the longest running and most consistently performing long short equity only funds in Australia, and we wanted to provide all types of investors with access to this strategy,” says Ms Liu.

Tcap aims for “equity-like” returns but with less market volatility given the strategy’s ability to hold both long and short positions. It offers clients core exposure to the ASX200 Index but with the additional option of holding up to 10 per cent outside the benchmark in small and mid-cap stocks. It is style agnostic and utilises a proprietary sector-based hedging strategy.

The underlying strategy, the Alpha Plus fund, has returned 12.45 per cent a year since inception, outperforming the ASX200 index by 2.87 per cent. 

Since taking over as manager of the fund in 2019, Ms Liu has delivered a return of 12.9 per cent a year compared to the ASX200 of 9.9 per cent – an annualised (net) outperformance of 298bps.

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Jun Bei Liu

Ten Cap will launch its first active ETF, Tcap (ASX: TCAP), on the Australian Securities Exchange on 24 November.

Tcap’s underlying strategy will be based on the firm’s long-standing investment offering, Alpha Plus, which is one of the longest running and most consistently performing long short equity only funds in Australia. It has been managed by Ten Cap co-founder and lead portfolio manager, Jun Bei Liu, for over six years.

Ms Liu says Tcap will bring a strategy which has until now only been available to institutional and advised investors, to a broader market of retail investors.

“We want all types of investors to gain access to our strategy and benefit from the returns that we have been generating for our existing investors for over two decades.

“The strategy’s defining feature is its ability to perform in both rising and falling markets. Gains can be generated from declining stock prices via short positions, making the fund’s performance less dependent on the overall direction of the market,” she says.

Ten Cap co-founder and CEO, Jason Todd says the launch of an ETF was a natural step for the business.

“This ETF represents a number of firsts for Ten Cap, following the launch of the business earlier this year. We wanted to offer an institutional grade product to a new set of investors and believe that ETFs are a great vehicle in which to do so and the right step for the growth of Ten Cap as a business.

“Demand for active ETFs is increasing as investors look for more cost-effective ways and an easier path to access investment strategies. ETFs are helping to reduce the friction costs of investing and at the same time are providing a broader range of investment products and options to a new generation of investors. We don’t want the Alpha Plus strategy to only be available to institutional and/or high net worth clients.

“The Tcap ETF is best suited for those who seek exposure to a unique and complex strategy that cannot be replicated via passive options, and one that is led by Jun Bei, an exceptional investment manager with a solid track record of delivering return to investors,” says Mr Todd.

Tcap aims for “equity-like” returns but with less market volatility given the strategy’s ability to hold both long and short positions. It offers clients core exposure to the ASX200 Index but with the additional option of holding up to 10 per cent outside the benchmark in small and mid-cap stocks. It is style agnostic and utilises a proprietary sector-based hedging strategy.

The underlying strategy, the Alpha Plus fund, has returned 12.45 per cent a year since inception, outperforming the ASX200 index by 2.87 per cent.

Since taking over as manager of the fund in 2019, Ms Liu has delivered a return of 12.9 per cent a year compared to the ASX200 of 9.9 per cent – an annualised (net) outperformance of 298bps.

Ms Liu adds the current market conditions make it a good time for this launch.

“We believe the cyclical tailwinds for the Australian equity market will continue to push it higher as we start heading into the new year.

“It is unlikely that the bull market is nearing an end, and as “fear of missing” out intensifies we think this could sharply push markets higher which will benefit the performance and returns generated by our ETF,” she says.

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Mark Kellock

Ten Cap has appointed Mark Kellock to the role of senior equity analyst within its investment team. He will work from Sydney and will report to founder and lead fund manager, Jun Bei Liu.

Mr Kellock joins Ten Cap following a five-year tenure at Red Door Capital Management where he was partner and senior investment analyst.

Prior to this he spent two years as a senior investment analyst Blue Pool Capital Family Office. He has also held senior research roles in the Hong Kong office of CIMB Securities, Barclays Investment Bank, Macquarie Group and Deutsche Bank. He started his career with Deloitte Australia followed by National Bank Australia.

Ten Cap founder and CEO, Jason Todd said the appointment is a key development that will support Ten Cap’s ongoing growth as it gears up to explore new distribution channels, including the launch of an ETF later this year.

“Mark brings more than 25 years of experiences in funds management and equity research. His experience includes leading high-performing regional teams and conducting research on some of Asia’s largest IPOs.

“His core expertise in the financial services sector including banks, insurance, fintech and SaaS – and his experience with additional sector coverage in technology, consumer, renewable energy sub-sectors such as EV, batteries and solar, as well as property and gaming – makes him a good fit for the Ten Cap team.

“Ten Cap has a singular focus on providing our clients with exceptional returns and experiences through the Alpha Plus Fund which is one of the longest running and most consistently performing long short equity only funds in Australia. Mark’s appointment assists us in maintaining that focus for our investors.”

Mark holds a Bachelor of Commerce, majoring in accounting and is a qualified chartered accountant.

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Jun Bei Liu

Lonsec has rated Ten Cap’s Alpha Plus Fund ‘Recommended’, citing confidence in the fund’s investment approach and leadership.

In its rating report Lonsec said portfolio manager Jun Bei Liu takes full responsibility for the investment process and key decisions, and she clearly explains her investment approach and takes strong ownership of how it is carried out.

“The fund’s investment process stands out, combining detailed research with long/short strategies, and using data tools to help manage risk,” Lonsec said.

“The Ten Cap team is strongly aligned with investors through co-investment, and the business shows good stability. These strengths, along with Jun Bei’s skills and experience, give us confidence in the fund’s ability to meet its goals.”

The ‘Recommended’ rating is part of Lonsec’s financial product ratings system, which provides financial advisers with insights to support their clients’ investment objectives.

Each rating reflects Lonsec’s degree of conviction in a product’s ability to generate risk-adjusted returns in line with relevant objectives.

Jun Bei Liu, lead portfolio manager, said, “We are focused on building a disciplined and repeatable investment process that can stand up to scrutiny and deliver long-term outcomes.

“It’s encouraging to see this approach acknowledged so early in our business’s journey.”

Jason Todd, CIO and co-founder, welcomed the rating. “Having Ten Cap’s business and investment process recognised in these very early stages is an excellent outcome.

“It is a great vote of confidence in Jun Bei and the investment team,” he said.

The rating is underpinned by Lonsec’s peer review process, drawing on the full expertise of its investment research team.

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Jun Bei Liu

Despite posting solid returns through 2024 the key drivers for the market to trade higher throughout 2025 remain intact, according to Jun Bei Liu, portfolio manager, and Jason Todd, CEO, of Ten Cap.

Ms Liu predicts the consensus will again underestimate the resiliency of the market and the tailwind from a combination of cyclical improvements, lower policy rates, improving confidence (both business and consumer) as well as record levels of liquidity, and that this will lead to equities moving meaningfully higher by year end.

“We started 2024 bullish and maintained our view throughout the year. As we head into 2025, we see no reason to adjust this view and are happy to be on the bullish side of a more moderate consensus outlook,” Ms Liu says.

“The global business cycle continues to expand, policy rates are expected to fall further, and inflation is no longer a concern. Even if inflation doesn’t moderate much further,  it should easily sit within key central bank ranges by 1H25.

“In Australia, the RBA has not even started to reduce policy rates, and this tailwind can be expected to gather momentum early into 2025. We think too much effort is focused on trying to time policy shifts when the main message should be that rates are heading lower and by year end will be 75-to-100 basis points below where they started. As to the exact timing, that’s simply a function of how the data evolves.”

Mr Todd adds that although economic growth is bouncing around historic lows, the trajectory is firmly higher. He says risk assets get comfort knowing growth has stopped declining. In the early stages of a recovery this is enough to raise the confidence of investors.

“Off the back of enormous levels of excess liquidity in the system, and easier financial conditions, we think equities will have another strong year as earnings growth begins to pick up and revision momentum improves,” he says.

“There is too much concern around valuations for equity markets acting as a constraint to further gains. Elevated valuations are more a stock specific story than a market story.

“Falling rates, improving earnings and rising animal spirits are positive tailwinds and these should be sufficient to offset political volatility and uncertainty around China’s outlook,” he says.

At the same time, Ms Liu says she doubts 2024’s winners will be the same in 2025.

“As the domestic economy picks up and as rates fall, we expect better performance from cyclical areas and/or those exposed to an improving global backdrop who can also benefit from a weaker Australian dollar.

“The consensus appears reluctant to consider yesterday’s cyclical laggards, but we think this is where the stock specific opportunities lie.”

Mr Todd agrees and says valuation and ‘bubble-like’ concerns are misplaced.

“The equity market is not cheap, but neither are valuations at self-correcting levels.

“Long bond yields have moved higher but importantly it has not come at the expense of widening credit spreads (even below investment grade). So while this is a minor headwind, it has not signalled a broad tightening in financial conditions and so the equity market has largely absorbed this rise.

“Similarly, for every sector that appears expensive – such as tech and financials – there are large market cap weighted sectors that are trading at discounts, including energy, materials, utilities, and staples.

“In addition, the global policy rate cut cycle is not complete and while expectations have moderated for the US, we do expect further easing to take place. We expect the US to underpin the global growth outlook supported by China which is now doing more to backstop its economy.

“Optimism the US – as a result of the US presidential election – together with record levels of cash are underappreciated supports for equity markets, and this will provide a floor for any technically driven sell-downs.”

Ms Liu adds: “Historically, equity markets have had two 5 per cent corrections each year and a 10 per cent correction every 18 months. It’s well within a normal trading pattern to see moderate periods of weakness for the equity market without the bull market that began in late 2022 being broken.

“Within the equity market, an improving cyclical backdrop alongside lower policy rates is very supportive for the smaller and mid cap end of the market, particularly given the defensive / growth tilt that has been in play through 2024.

“We think falling risk aversion will support out-of-favour areas within value, such as energy and materials, as well as rate sensitive areas, such as selected property and laggard consumer plays. In addition, a steepening yield curve alongside rising capital market activity will benefit some diversified financials,” she says.

-oOo-

TEN CAP MEDIA RELEASE

Liu, Todd launch new hedge fund business

Fund manager Jun Bei Liu and CEO Jason Todd will launch a new hedge fund business, Ten Cap, on 1 February 2025. It will be the largest ever launch of an Australian long-short equity-only hedge fund  at just over $1.5 billion.

“Alpha Plus will become Ten Cap’s flagship fund.   The fund is one of the longest running long short strategies in Australia and Ms Liu has been lead portfolio manager of the fund for the past five years via Tribeca Investment Partners.”

Mr Todd says the fund provides exposure to the ASX200 Index through a style agnostic strategy, overlaid with a proprietary long-short allocation and hedging strategy.

“Under Jun Bei’s stewardship, the Alpha Plus fund has been one of very best performing in market over both a short and long-term period.

“While the investment process and how the fund is run by Jun Bei will remain unchanged, she will now have a dedicated investment team and trader. The historic performance of the fund, back to 2006, remains the same.”

Mr Todd says the boutique investment firm will reflect the core values and beliefs of the founders and is an opportunity to bring together two sets of highly complementary skills.

“We believe that a fund management company does not have to be large or have multiple funds to be successful. “Our goal is to continue to provide our clients with best of breed returns and a best in class investment experience.”

Co-founder, Ms Liu, says she has already hired a highly experienced investment team that believes they will add to a proven and trusted investment proves, in turn providing even better outcomes for clients.

“Ten Cap will bring a fresh approach to Australian funds management – where money managers are accessible and where trust is built up by putting clients first and growing together.

“The objectives of the fund have not changed. We aim for equity-like returns but with less market volatility given the fund’s ability to hold both long and short positions.

“The fund will continue to operate under its established investment mandate and fee structure, ensuring continuity and continued excellence in performance,” Ms Liu says.

Tribeca will continue to provide middle and back-office functions for the Alpha Plus fund via a third-party supplier arrangement.

The origins of the name ‘Ten Cap’ come from the letter ‘J’ being the tenth letter of the alphabet and the first letter of its founders’ names.

“It also represents our strive for perfection of being 10 out of 10,” Mr Todd says.

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Jun Bei Liu

Tribeca Investment Partners expects the August reporting season to separate the ‘wheat from the chaff’ in listed companies, with its portfolio managers suggesting slowing economic activity, higher interest rates and higher labour costs will slow corporate earnings results.

Jun Bei Liu, lead portfolio manager of Tribeca’s Alpha Plus Fund is expecting the coming reporting season to be one of the softer reporting seasons in recent periods.

“We are expecting company revenue to be under more pressure and that margins will continue to move lower, given the slowing economic activity and higher inflation. However, this is a mixed bag when looking deeper into each sector.

“We are expecting consumer facing companies, such as retailers, to report in line with expectations as many have already downgraded. It is likely the first six weeks trading update will be softer than expected.

“We anticipate a cautious outlook statement from companies with higher costs, and freight costs in particular have moved up significantly. It will be interesting to observe share price reaction post these softer results from consumer companies as many are trading at high valuations.

“Healthcare will have better results this year compared to previous years, though the costs pressures mentioned above also remain high for this sector, and we don’t expect meaningful price impact.

Ms Liu says banks continue to have a strong capital and she expects more capital management initiatives to come from this sector. On the resources side, Ms Liu is expecting some underperformance given China’s economic weakness, but she notes there are companies still trading at a discount.

“Resources have been an underperforming sector heading into earning season. However, we believe large, diversified resource companies such as Rio Tinto (ASX: RIO) and BHP Group (ASX: BHP) are trading at a steep discount to NTA with a small earnings upgrade expected. This sector is likely to improve once it delivers to result expectations and pays out large dividends.

“Overall we are expecting the consensus forecasts to move lower in the single digits for FY25 on softer guidance which does provide a nice rebase before the expected interest rate cut next year,” says Ms Liu.

Meanwhile Simon Brown, Australian Smaller Companies Fund portfolio manager, cautions that higher interest rates could hit earnings growth of some companies.

“This presents risk to the earnings forecasts in for the first half of 2025. For now, we favour exposure to companies such as Flight Centre Travel Group (ASX: FLT) that will benefit from more affluent/less indebted consumers and those with the ability to grow under their own steam,” he says.

“Mining and associated sectors should benefit from buoyant commodity prices and easier operating cost environment. Outlooks will be influenced by Chinese economic conditions given their share of global resources consumption, but right now, margins are pretty good for Australian resources companies,” he says.

“While we agree that any surplus of material across the commodities sector is unlikely to be helpful of prices in the very short term, this is not going to incentive new tonnes in the medium term to fill the fast-growing need for product,” Mr Brown said.

“Interest rate sensitive sectors such as REITs have also done well recently in anticipation of a near-term rate cut in the US, despite sticker inflation here. Given the underlying strength of the respective economies, continued stimulus and upcoming elections, we don’t anticipate materially lower long term interest rates to drive these sectors meaningfully higher.

“Some developed market central banks have now started their rate cutting cycle as inflation pressures fade, but the pace of easing will likely be more modest than expected a few months ago. Australia is proving an exception to this view, as inflation is looking more stuck than sticky, creating a bias for further tightening from the Reserve Bank,” said Mr Brown.

Domestically, he notes large caps have noticeably outperformed their mid and small peers, and financials have led as banks continued to defy valuation expectations.

“Laggards have included materials, energy and industrials companies,” he says.

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Jun Bei Liu

With only a few days left of the current ASX reporting season, it is clear that economic recession is now a declining tail risk that has been largely removed from the consensus vocabulary, and that peak uncertainty is in the rear vision mirror, according Jun Bei Liu, lead portfolio manager of the Tribeca Alpha Plus Fund.

While it can be hard to give up the ghost for those who are adamant that rate hike cycles result in recession, Ms Liu says the current reporting season illustrates that corporates are well placed to navigate further growth weakness.

“Interest rates are likely at peak, economic growth has remained resilient, inflation is falling, house prices have not collapsed, mortgage defaults have not become systemic, and the list goes on.

“Corporates remain cautious but fiscal 2024 is likely to be better than fiscal 2023.”

Ms Liu concedes there are pockets of weakness, but says this varies by industry and stock.

“There is a rolling slowdown underway, rather than an abrupt shock that has impacted all corporates at the same time and to the same degree.

“This is good for investors as it means there are pockets of strength – for instance in infrastructure, mining services and technology – to offset pockets of weakness – such as in consumer and cyclicals.

“Despite sells off in areas which have disappointed  – as we have seen with consumer staple companies Woolworths (ASX: WOW) and Dominos (ASX: DMP) – there is no loss of faith in the overall outlook as tends to happen when there is fears of capitulation.

“Instead, there appears to be a strong willingness to buy the equity market, including cyclical stocks, and to accept that even for areas where further weakness is expected, they can be purchased at the right price.

“This bodes well for the market and suggests that signs of further improvement will be greeted positively even if they come against a backdrop that remains a little uncertain.

“Certainly the mood of investors is more hopeful than fearful and, as witnessed in 2023, this is a very powerful mechanism to limit market downside and drive further strength.”

For investors, she says, the reporting season always brings challenges but equally it brings opportunities.

“Over the coming year we expect to see additional policy support for the Chinese economy, which should provide a stronger tailwind for selected commodity exposures, for short rates to begin falling which should help provide a floor for some rate sensitive areas that are not under structural pressures and for the cyclical outlook to begin to improve, once we are through a short and shallow slowdown.

“Relative valuations provide strong support for defensive growth areas like Healthcare and Technology vis-a-vis deep cyclicals, which are already priced for a rebound and leave little room for disappointment, but we do think that adding risk as more transparency on the timing and pace of policy support will be an enduring theme throughout 2024.

“We started the year with a stronger than consensus call to be positive on the equity market and it feels like we have already been rewarded with the market bouncing around all-time highs.

“The market will require lower rates and certainty that the earnings slowdown is bottoming out if it is to sustainably trade higher, but we think these drivers will come as the year progresses.

“We don’t think investors should be overly concerned by elevated volatility, which is now part and parcel of a world where economic and geopolitical risks remain high. We think pull-backs will be opportunities to buy rather than sell, as the market grinds its way higher,” Ms Liu says.

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Andrew Swan

While investment opportunities in global share markets hinge on a number of factors, such as artificial intelligence and resilience in corporate earnings, the Australian market continues to be a source of high dividend yields and has the potential to be a strong relative economic outperformer, according to GSFM fund manager partners Munro Partners, Man GLG and Tribeca Investment Partners.

Factors including developments in artificial intelligence (AI), relatively robust consumer spending, and companies being able to maintain discipline on their cost structures, will be key for investors in global equities.

Munro Partners portfolio manager, Qiao Ma, says that the long term interest rates have peaked in October 2022, and the Munro team is observing encouraging signs of the start of corporate earnings re-acceleration.

“Clearly we are not completely out of the woods yet with sticky inflation and further rate hikes expected over the next few months, so we stay very vigilant with risk management,” she says.

“However, we have seen the earnings growth trajectory picking back up over the past few months.  Consumers have been more resilient than expected, especially around the trends such as health and wellness. The start of AI super-cycle will likely accelerate the rate of innovation across many industries for years to come. In the second half, we also expect good performance from the industrial companies driven by spending plans in the US, including the Inflation Reduction Act and the CHIPS Act.

“It is heartening to see that the market has been returning to a more normalised environment, where share prices follow earnings. This bodes well for our process of looking for earnings growth opportunities backed by a structural tailwind.

“Our portfolio is exposed to the many different idiosyncratic growth drivers, such as AI, resilient consumers, as well as industrial companies benefiting from de-carbonisation.  We are well positioned for the second half of 2023 and beyond,” Ma says.

Man GLG’s head of Asia (ex-Japan) equities, Andrew Swan, says he is also watching developments within generative AI closely, on the expectation that they may kick off a new investment cycle, with associated productivity gains driving better than expected economic growth.

“The equity market has been quick to revalue the entire tech hardware supply chain in Asia in hopes of a new tech cycle as evidenced by strong price performance of the sector. 

“We recognise that the use cases for AI are evolving rapidly and believe this may potentially act as a catalyst to start another tech hardware cycle.

 “We expect South Korea and Taiwan to be the main beneficiaries of this shift – both markets play a vital role in the tech hardware supply chain and are home to some the world’s largest electronics and semiconductor manufacturers.

“Semiconductors have been our preferred means to access the AI value chain so far. 

 “Opportunities in China appear less clear at present, however, and that may have earnings implications for both companies developing AI capabilities and those supplying AI hardware globally,” Swan says.

Locally, Tribeca Investment Partners lead portfolio manager, Jun Bei Liu, says while the Australian market might take comfort from an expected end to rate hikes, investors will have to deal with a slowdown in economic and earnings growth as tightening liquidity conditions finally take their toll on household spending and on business activity and hiring.

“It is usual for equity markets to weaken into recessionary conditions, but while the near-term risk-reward outlook suggests some caution, we do not expect to see a deep or prolonged downturn.

“The good news is that a lot of the valuation de-rating as a response to rising rates has already taken place with many areas heavily discounted since the start of interest rate hikes back in the second quarter of 2022. Provided bond yields don’t have a lot more upside and the growth slowdown is relative short and shallow, then the need for further valuation de-rating at a broad market level is not necessary.

“In addition, Australian corporates are well capitalised having refinanced or issued debt during the COVID-19 pandemic period at rock bottom rates which should provide some protection should financial conditions materially change.

“More importantly, uncertain, and volatile markets are about seeking out the most attractive relative value opportunities and we are less focused on the direction of the market than we are on stocks that have been overly discounted because of macroeconomic uncertainty.

“Longer term we think the broader market can recover from any near-term cyclical weakness as solid economic supports cushion against downside risks such as strong population growth and elevated commodity revenue, and corporates manage costs into a weakening demand backdrop.

“Australia still has one of the highest dividend yields on offer and, downturn or not, Australia has the potential to be a strong relative economic outperformer. We think market dislocations will be short lived and that any weakness over coming months will be an opportune time for active managers to pick over stocks and position for the start of the next upswing,” Liu says.

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