Pick and Choose When Investing In Asia

Large Asian opportunities exist, but investors must watch out for landmines

Alanna Petroff 15 May, 2012 | 10:55AM
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“You don’t have enough money in Asia, and you ought to have more.” That was the main message from Matthew Dobbs, a fund manager at Schroders and an expert in Asian investments. Dobbs was speaking at the sixth annual Morningstar Investment Conference, where he outlined his current views on Asian investment strategies.

The fund manager conceded that high growth in Asian economies does not guarantee high growth in your investments, making it tricky to devise an effective investment strategy.

“That high growth rate doesn’t necessarily come back in returns,” he said.

Therefore, investors must be targeted in the way they invest in Asia. There are some quality sectors and countries, but there are other areas that are value traps. For example, while Dobbs likes China over the long term, he believes that investing in China right now is not a good strategy in the short term. In particular, he is cautious about banks in China, saying he believes that Chinese banks are beginning to look a lot like the Royal Bank of Scotland. These companies are cheap “but they’re cheap for a reason,” he said. Since 34% of the overall Chinese market is dominated by financials and banks, it would be risky to be bullish about China as a whole right now, he explained.

Meanwhile, other areas in Asia and other sectors are far more attractive. In particular, Dobbs says he likes well-run, large manufacturers who continue to gain market share as smaller companies fall to the wayside. He also likes prospects for Indonesia, Hong Kong and the Philippines.

Dobbs runs the Silver-rated Schroder Asian Alpha Plus fund, which invests in large, mid and small-cap companies in Asia. He also manages a number of other Asia-focused Schroders funds.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.

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