3 funds providing an entry to Asian markets
Platinum, Stewart Investors and Aberdeen are solid Silver-rated options for investors looking to gain exposure to Asian powerplays in electronics, ecommerce, and insurance.
Platinum, Stewart Investors and Aberdeen are solid Silver-rated options for investors looking to gain exposure to Asian powerplays in electronics, ecommerce, and insurance.
Platinum Asset Management is among several fund managers who see opportunities in Asia, despite the global equity sell-off.
Platinum chief executive Andrew Clifford last month urged investors not to overlook the 80 per cent of global stocks that sit outside the US – and outside the overheated sectors of software, internet services and biotechnology.
Morningstar Investment Management Australia's Nimalan Govender is another who is focusing on companies from emerging Asia, particularly Korea, Japan and Taiwan.
A burgeoning EV segment ranks among emerging Asia's investment opportunities
Platinum Asia
For a targeted Asian approach, Platinum Asia (9894) has a Morningstar Silver rating and four stars.
"It ticks almost all the boxes, making it one of our top ideas for investors seeking Asian equity market exposure," says Morningstar associate director, manager research, Tim Wong.
Previously headed by Clifford – who earlier this year took over as chief investment officer and CEO from industry doyen Kerr Neilson – the Asia fund is now overseen by portfolio manager Joseph Lai.
China accounts for 50.1 per cent of its fund holdings, followed by 16 per cent and 14 per cent for Korea and China, and 6 per cent weightings each to Hong Kong and Thailand.
The fund has paid for its overweighting to China in recent years, particularly in 2016, when its exposures to large caps insurance giant China Taiping and ecommerce play JD.com faltered.
Despite this, the returns are impressive. The three-year average is 5 per cent; the five-year 9.6 per cent; and the ten-year 10.7 per cent.
"As Platinum has shown time and time again impressive performance will return eventually,” says Wong. “And it did in 2017 when its increased exposure to China, in particular, paid off handsomely.”
The fund’s top holdings include ecommerce juggernauts Alibaba and Tencent Holdings, which have delivered “enormous revenue growth”, says Wong.
Also in the top ten are China’s Ping An Insurance and South Korean electronics powerhouse Samsung, which Clifford expanded on in a recent Morningstar conference.
Stewart Investors Global Emerging Markets Leaders
Morningstar Silver-rated fund, Stewart Investors Global Emerging Markets Leaders (17803) is underweight China, with India its highest country exposure – just shy of 30 per cent of its portfolio as at the end of July 2018.
Taiwan and South Africa each held about an 11 per cent share, followed by a 9 per cent weighting to UK and just under 7 per cent Mexico – these tilts have remained relatively consistent over the last three years.
Financial services and technology each comprise about 14.5 per cent of the portfolio weighting, respectively, followed by consumer defensive stocks at 3.5 per cent as at the start of April 2018.
However, the consumer sector has been a much bigger player at various times over the past five years – accounting for about 30 per cent of the fund as at February this year, according to Morningstar manager research analyst, Sarah Fox.
India's Tata Consultancy Services heads its lists of top 10 holdings as of 30 June. The list also includes Unilever – its second-largest holding – and South African financial services and consumer stocks Remgro and Tiger Brands. Though Unilever is London-headquartered, it qualifies because it derives a majority of earnings from sales into emerging markets.
Fox notes the fund has outclassed rivals since its inception in 2010 – delivering returns of more than 9 per cent over the five years to February 2018 – though this stellar run drops to 3 per cent when averaged over three years.
"The main reason for this is that the team's conservative approach can cause headwinds when cyclical stocks are rallying sharply.
"Investors should expect such underperformance when low-quality cyclicals surge, but the portfolio's holdings in high-quality companies with sustainable cash flow have added significant value over time, especially during market downturns," she says.
Aberdeen Standard Emerging Opportunities
Aberdeen Standard Emerging Opportunities (11594) rounds out this trio of Silver-rate funds.
Aberdeen has a 25 per cent exposure to China, and 13 per cent to India. It also holds more than 9 per cent of its portfolio in South Korean stocks. South America and South East Asia are also represented, with 12 per cent invested in Brazil and 5 per cent in Indonesia.
"It is a proven choice when it comes to emerging-markets equities and we see it as a standout offering in its category," Morningstar manager research analyst Matt Wilkinson says.
The fund has a 6 per cent holding in both Samsung and Tencent. And a 5 per cent exposure to chipmaker Taiwan Semiconductor.
Wilkinson notes the fund struggled in 2017, particularly as the portfolio manager Devan Kaloo and his team stayed underweight Tencent and declined to hold Alibaba.
Trailing returns to the end of November 2017 are bottom quartile over one, three, and five years annualised, but top decile over the previous decade, Wilkinson says.
The fund delivered 3 per cent returns over three years to the end of October 2018, 4.3 over five years and 8.2 per cent over 10 years.
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Glenn Freeman is senior editor at Morningstar Australia.
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