In an uncertain economy, many investors are starting to take note of the booming markets in Asia for diversification in their portfolio. But how do you know where to start?
It’s no secret that Asia is today’s global growth story. It may still be a developing set of economies, but it looks a lot more attractive than investing in the United States or Europe with the issues currently plaguing these regions.
The US and Europe are much more mature markets than Asia. They are also mired in a whole lot of problems like excessive bank and government debt, and budget and trade deficits. And naturally if some countries are running deficits, others have to be running surpluses.
From rags to riches
Fifteen years ago, Asia had the same sorts of problems that are now plaguing Western economies—high currencies, too much liquidity, inappropriately low interest rates and poor lending practices. But in the late 1990s, the International Monetary Fund imposed some austere and controversial measures on Asia to deal with those issues, including stabilising the currencies in the region.
At the time it was difficult for Asia to recover, but years later it is paying off. Not only is Asia the most rapidly growing region in the world, but it has been working longer at improving its economic issues to now be in a position of relative strength.
An economic melting pot
Asia is also an extremely diverse set of economies. David Bryant, chief executive officer of Australian Unity Investments, explains, “There are mature economies like Japan and Korea, where the population may be ageing but the economic capacity is still extraordinary. Then you have large but still growing economies like China, and independent, developed economies like Singapore, Hong Kong and Taiwan. And of course there are the emerging economies of Indonesia, Vietnam and other ASEAN countries.
“Collectively these economies are developing their own value chains in a lot of industries, and this is where it becomes clear that Asia is not simply a China story. China has certainly established itself as the centre of the Asian economies and will do so for some time to come, but it still needs technology from the mature economies and imported production and services from the emerging Asian countries.”
This mix of economies provides a balanced portfolio in itself, whereas in Europe the collective economies can be defined very closely. Some of the European countries have more legacy issues than others, but generally they have a lot of lending activities between banks, are very dependent on each other, and are more mature economies.
“Asia is not yet at the point where its own consumption can solely drive its activity, so it does still rely on a degree of Western consumption,” adds David. “So it isn’t immune from the issues of the West, but it is much less affected—its growth prospects are stronger, its selfsufficiency is now greater, and it has fewer legacy problems.”
Proceed with caution
Of course, being able to keep growth at a regulated and sustainable pace is always a challenge. In any economy that goes through rapid growth, bubbles will emerge—look at the US and its current problems as an example. Then it comes down to the capability of government to address and manage those issues, where David says a country like China has both benefits and disadvantages.
“The challenge is the sheer scale and complexity of the country. However, the matrix of Chinese government, which is both regional and national, is structured in a way that it may well be able to juggle the needs and growth of the country. It is definitely a test—but I’d choose that over the current problems of any of the Western economies!”
One for the experts
So with this interesting set of economies, which markets should investors access and when?
“The main thing to understand is that Asia is many different economies, cultures, languages, industries and political scenarios,” David warns. “It’s highly complex, and the only way to invest well is to have an intimate understanding of all those factors. Also given the many different dynamics, things change at a faster rate than in Australia. Knowing when to buy and when to sell is critically important.
“You can’t do all that unless you’re local, and that’s why the Australian Unity Seres Asian Equity Opportunities Fund, managed by our joint venture partner Seres Asset Management, is an ideal way to invest.
The team is located in Hong Kong, and the portfolio managers have decades of experience investing in Asia. They are constantly receiving new information to help them understand all the elements about the markets they invest in, to ensure the best possible outcome for investors.”
For more information about Seres, visit australianunityinvestments.com.au or call us on 13 29 39.
Important information
The Australian Unity Seres Asian Equity Opportunities Fund is issued by Australian Unity Funds Management Limited ABN 60 071 497 115, AFSL 234454. This information is intended only to provide a broad summary of the financial product and is not based on the financial objectives, situation or needs of any particular investor. In deciding whether to acquire, hold or dispose of the product, you should refer to a current copy of the Product Disclosure Statement (PDS) and consider whether the product is appropriate for you. A copy of the PDS can be obtained by visiting australianunityinvestments.com.au or calling 13 29 39. The information provided here was current at the time of publication only, and we recommend you access our website for further information.
