Asia tech is a key theme for you. Can you highlight the attractive investment trends within Asia tech?
Asia's status as a manufacturing base for products such as PCs and mobile phones has underpinned the IT sector in Asia in the past.
And over time Asian companies have moved up the value chain and industry clusters have emerged across various geographies.
Now, Asian companies have become global leaders in their respective industries.
As digital transformation and disruption both continue and accelerate, we believe the 5G era will bring new applications and disruption, and drive an exponential increase in data creation, processing, transmission and storage.
This trend has been accelerated in part by the COVID-19 and geopolitical trade tensions, which have highlighted the importance of supply chain security. At the same time, China is aggressively investing in the semiconductor industry in order to achieve a greater degree of self-sufficiency.
We expect this will drive demand for advanced semiconductor chips. More powerful chips will be required to provide computing power to Artificial Intelligence (AI)-type applications and also to consume less power as mobility remains a critical requirement.
There are a small number of companies in Asia that possess the technological leadership to manufacture such advanced chips and we expect that these companies would do well as critical enablers in the era of digital transformation.
You have talked before about Asian consumers upgrading their consumption patterns. High-end liquors are a common example of this, but could you highlight some other ways that the premiumization trend is playing out?
One of the prevalent and sustainable trends in the region is changing consumption patterns.
As Asian economies develop and grow more affluent, consumption and spending patterns are shifting away from basic necessities toward discretionary goods and services.
We also see demand is shifting to higher quality, premium brands in individual product categories.
The growing popularity of premium liquors is one well-established trend, but we also see this trend across a variety of grocery and personal care products. We see similar trends also playing out in other, more expensive product categories, like automobiles and education, across Asia.
In Asian equities, China is no doubt a large part of the growth story. But Southeast Asia is also growing rapidly. Where are the opportunities there? Any thoughts on the Vietnam stock market?
ASEAN represents a large population with relatively good demographics, and we do find stock-specific opportunities therein, particularly in Indonesia and Thailand.
ASEAN's population of 668 million is bigger than the European Union's 448 million.
The recently-signed Regional Comprehensive Economic Partnership (RCEP) agreement, together with US-China trade tensions, will make Southeast Asian countries even more attractive as manufacturing regions.
In terms of GDP, RCEP is the biggest trade agreement in the world. It makes Asia as a bloc more attractive as a regional manufacturing hub, as it lowers barriers to the movement of intermediate goods between countries, thereby making Asian supply chains more efficient.
Vietnam is also a beneficiary of the RCEP. We believe Vietnam will be one of the fastest growing economies in the region in the next few years. Despite the impact of the COVID-19 pandemic, Vietnam reported positive economic growth in 2020 of 2.91%, and foreign direct investment of USD 17 billion .
MSCI currently classifies Vietnamese equities as Frontier Markets and the stock market is still developing in terms of number of attractive opportunities, liquidity and transparency. Apart from investing directly in Vietnamese equities, we can also get exposure to Vietnam's rapid growth through regional companies that manufacture products sold to Vietnamese consumers and businesses.
Shou Pin Choo
Portfolio Manager Asia Equity All Cap HALO
How do you differentiate between market noise and market signals when it comes to deciding what’s important to your portfolio?
They key to differentiating market noise from relevant factors is firstly to have a well-researched long-term investment thesis on a company, along with specific and quantifiable/measurable milestones and signposts. We then need to evaluate how these might be impacted by market noise/news and other factors.
Thinking longer term helps us to sift the market noise from more longer-term, structural changes in the industries and companies.
While sell-side brokers and other more short-term oriented investors may focus on the next year's earnings and sometimes the next quarter, we focus on where the company and industries are headed in the mid to long term.
The market inefficiency that we are taking advantage of could be referred to as "time arbitrage“ and this helps us to add value to our portfolios over time.
Perspectives matter. Tune in to our insights.