Ask The Experts: Benefit From A More Aggressive Approach As Equities Rally
Yap Sze Sze, Product Manager of Asia ex-Japan Equities at Schroder Investment Management, shares with Fundsupermart some investment ideas the Schroder Asian Growth Fund, one of our Recommended Funds for Asia ex Japan, is focusing on.
Do you think problems in US and Europe will have a lasting negative impact on Asian financial markets?
- Yes, as stock markets are unlikely to decouple and so developments in Europe and the US will have an impact on Asia
- Difficult environment will continue into 2012, structural problems in Europe will take a long time to resolve
How is the fund positioned in light of such negative sentiment?
- Relatively defensive at the moment
- The fund has a beta below 1
- Focus on the theme of domestic consumption
The fund appears rather bullish on the Greater China region with more than half of its portfolio allocated to Hong Kong, China and Taiwan as at 30 September 2011. What are the reasons for this positive outlook?
- Breaking the Greater China region down, the fund is largely overweight in Hong Kong and underweight in Taiwan and China
- Underweight in Taiwan as it is an externally-driven economy, and in China due to problems surrounding non-performing loans (NPLs)
- Within all 3 countries, similar stock ideas and themes revolving around consumption
The fund also has 17.6% of its portfolio allocated to Korea. What is the outlook with regards to Korean equity?
- As the fund is managed against the MSCI AC Far East ex Japan benchmark which has an approximate 25% allocation to Korea, the fund is underweight Korean equity
- Underweight position a result of concerns over macro headwinds
- Korean equity portfolio mainly consists of domestic-looking companies and market leaders of respective sectors such as Hyundai the auto-maker
Other than domestic consumption driven companies, what other companies does the fund look out for to invest?
- Another theme that will likely play through in the long-term is the commodities super-cycle
- Certain resources and material companies will benefit
- These companies tend to be more cyclical and the fund is careful in their stock selection, focusing on companies with robust business models and strong profit margins
- The fund also adheres to a strict valuation discipline
What kind of investor is the Schroder Asian Growth Fund suitable for?
- The Schroder Asian Growth Fund has a more aggressive approach with an unconstrained stock selection
- Suitable for investors with a higher tolerance for risk
- Complementary to Schroder Asian Equity Yield Fund, which focuses on yields and higher quality companies that provide a more defensive exposure to Asian equities
||06 February 2012
||Ask The Experts: Benefit From A More Aggressive Approach As Equities Rally