ST Wong

A broader, more diversified approach on the ASX could be more effective in a higher interest rate, higher inflation environment, as investors grapple with the likely impact on the consumer, according to ST Wong, Chief Investment Officer at boutique fund manager, Prime Value Asset Management.

The RBA’s move will introduce a degree of caution for investors, Wong said. “In its latest statement, the central bank cut its economic growth forecasts and is also anticipating a longer horizon to inflation returning towards the mid-point of the RBA’s target 2-3% band.

“Depending on the trajectory of future rate rises, which is now even more dependent on the pace of inflation, economic growth should slow, which will be on the mind of investors.”

The rate rise has come at an interesting time on the ASX where many quality stocks have underperformed. “We’re facing an interesting dynamic where the Australian dollar is climbing higher, and there are many quality companies which have underperformed magnificently.

“These could theoretically represent good buying opportunities, though it’s not a done deal – an attractive valuation will not guarantee future returns. Investors need to choose wisely.”

Wong said shifting from binary to broad thinking could be necessary in this market. “Instead of thinking in binary terms, such as value versus growth, or banks versus resources, consider broad thinking.

“Think broad-based exposure to a variety of opportunities. For example, instead of thinking about the Mag 7 companies the USA or CBA in Australia, both which worked well in 2025, look for opportunities across the market spectrum.

“This could mean some value and growth stocks – both banks and resources. A broad-based exposure to quality companies with good earnings.”

Mr Wong said he would be watching for any possible impact on the consumer. “Higher interest rates will exacerbate the two-speed economy, thereby influencing spending patterns.

“We will be watching for the trajectory of interest rates but also for relief on cost-of-living pressures for the middle to lower income cohort.”

He also said that companies exposed to higher gearing levels are suddenly less attractive. “Late last year the market was talking about potential interest rate cuts, but things can change quickly and it’s hard to justify exposure to leveraged stocks.”

ST Wong manages the Prime Value Opportunities Fund, which is Recommended by both Lonsec and Zenith, and has delivered 9.3% per annum net of fees since inception in 2012 to 31 December 2025.

Prime Value Asset Management was founded in 1998 and is part of an investment group including Shakespeare Property Group, managing around $3 billion in equities, income securities, direct property and alternative assets.

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ST Wong

The extreme divergence in performance within ASX sectors underlines the benefits of analysing investments at company level, according to ST Wong, Chief Investment Officer at Australian boutique, Prime Value Asset Management.

“There is a temptation to choose winners and losers at sector level for the year ahead – but there is a well-established current trend of bifurcation in performance within sectors, making a strong case for bottom-up analysis.

“For example, Myer has just downgraded while premium shopping centres are doing well, and consider the recent performance of CBA versus the rest of Australia’s banking industry.

“There is REA versus Domain in real estate classifieds, Coles versus Woolworths in the supermarket sector, and Medibank and NIB in health insurance.

“We are seeing more instances of certain companies increasing market share at the expense of their competitors.”

Mr Wong said many macro predictions have proven unsound recently. “Many commentators one year ago predicted the US could experience recession with aggressive interest rate cuts. But the US economy proved to be more resilient than anticipated.

“As we turn to 2025, there is potential for recovery in the Australian economy but there are questions about how investors can best take advantage in the year ahead.

“A large part of the index has been re-rated up substantially in the last two years – can it continue to post significant gains? The best opportunities look to be at ground level.”

Mr Wong said ASX companies which have invested heavily in their business are well placed, with some set to deliver over a longer term as they widen the gap with their competitors. “We like companies who have recently invested in their business, while operating in a strong market structure. For example, mining explosives specialist, Orica (ASX: ORI).

“Orica has invested heavily in the US market, and looks well placed against its competition with no new explosives plants expected to come into the market for the next five years.

“James Hardie (ASX: JHX) also looks promising, even while we expect the US housing backdrop to remain challenging in the near term.

“With best-in-class profit margins, James Hardie will benefit from a cyclical upside should the US housing market recover from its lows.”

ST Wong manages the Prime Value Opportunities Fund, which invests across the ASX, and has delivered 11.9% per annum net of fees for the year to 31 December 2024, and 9.8% per annum net of fees since inception in 2012.

Prime Value Asset Management was founded in 1998 and is part of an investment group including Shakespeare Property Group, managing around $3 billion in equities, income securities, direct property and alternative assets.

The post Bifurcation on ASX demands bottom up view for 2025 appeared first on AdviserVoice.

This follows a recommended rating from Zenith Investment Partners earlier this year.

The Prime Value Opportunities Fund is a concentrated investment vehicle, which can allocate 100% of the portfolio to cash in extreme market conditions. The Fund has returned 19.4% per annum for the year to 31 August 2018, and 13.7% per annum to investors since inception in October 2012.

On awarding the upgrade, Lonsec said: “The Fund has delivered strong outperformance in ‘down’ markets which highlights the Manager’s capital preservation bias.

“The Manager demonstrates strong alignment with underlying investors and there is significant co-investment in the funds from the investment team and the owners of the firm.”

Prime Value Opportunities Fund portfolio manager, ST Wong, said key to the Fund’s outperformance was its focus on minimising mistakes. “To use a sporting analogy, we start with defence first and build our offence from there.

“It’s a myth that returns are driven by picking big winners. Preserving capital and avoiding bad mistakes has a more powerful effect on long-term returns.”

Lonsec also said: “At the core of Prime Value’s philosophy is the aim to minimise mistakes, which Lonsec perceives as being particularly important given they are a high conviction manager.”

Boutique manager Prime Value Asset Management is part of an investment group including Shakespeare Property Group, managing more than $1.5 billion across equities, cash plus, direct property and agriculture investment.

Earlier this year when upgrading its rating, Zenith said the Fund has a unique and attractive investment approach, and a long-term track record of meeting investment objectives.

The Prime Value Opportunities Fund is currently available on platforms including BT Wrap, Hub24, Netwealth, Powerwrap, and Macquarie Wrap.

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