I believe that change is the only constant factor when it comes to investing and this has become increasingly evident in the last 18 months. A new global order has begun to manifest itself as the nature of the Sino-US relationship has clearly changed. While we have been waiting for these new norms to unfold, we have seen large swings in investor sentiment, with the effects of the trade dispute and, of course more recently, the coronavirus being felt across the global economy and financial markets.
Nonetheless, Asia continues to be home to structural changes, despite these headwinds to near-term growth. Intra-Asia demand now makes a significant contribution to domestic revenue generation. Selected Asian technology companies, like Taiwan Semiconductor Manufacturing and Samsung Electronics, have emerged to become global technology leaders.
China continues to lead the region's e-consumption, as well as an overall trend towards premiumisation (or trading up) in consumption preferences. Urbanisation and the rising middle class across Asia is the secular growth story that is driving consumption.
Governments in India and Indonesia are expected to continue to steer domestic reforms, which is positive for these markets' long-term economic growth. Asia policymakers remain pro-growth with fiscal stimulus and monetary easing.
Discipline can reward investors
The ongoing uncertainty relating to coronavirus will likely continue to drive negative headlines. The near-term impact on the Chinese economy will be significant, although periods of related market volatility are an ally of investors with a clear investment philosophy and a disciplined approach.
In this regard, I maintain my view that there is no going back on regional structural shifts that have already been set into motion. If anything, the outbreak will increase the penetration of online consumption further - driven by a combination of health concerns in the near-term and overall convenience. Areas like e-tutoring, streaming entertainment online, ordering groceries online etc will receive a forward push in China. This re-emphasises that the long-term shift from offline to online is here to stay.
Portfolio positioning
The Fidelity Asia Fund will continue to rely on my well-established mosaic investment approach, as well as my experience in navigating uncertainty.
There is a clear focus on domestic exposure in the portfolio to benefit from strong local demand and I look to target long-term winners at attractive valuations. As mentioned above, I also prefer exposure to companies that benefit from the secular growth of e-consumption, a rising middle class and premiumisation.
The fund has an overweight exposure to health care holdings in WuXi Biologics, Innovent Biologics, and Hansoh Pharma, where the Chinese government will continue to provide policy support to accelerate innovative drugs development. The coronavirus outbreak also draws attention to the importance of life insurance protection products in China, and the fund has long standing exposure to insurers AIA and China Life.
The portfolio also maintains conviction in preferred positions across the market where management teams are experienced and are in a position to capitalise on the underlying structural growth prospects.
I continue to favour taking a long-term view of things. This approach allows the investment thesis to develop, unfold and be recognised by the market. It differentiates the winners from the mediocre.
My focus is not just on alpha generation but on striking a balance between generating returns and managing the risk for our investors. The returns delivered by the portfolio over my tenure and the liquidity it offers endorse the success of this balanced, long-term thinking.
Further information
You can view more Asia focused thought-leadership from Fidelity covering a broad range of investment ideas from across the region, from the links below.
A different perspective on Asia
This information is for investment professionals only and should not be relied upon by private investors.
The value of investments can go down as well as up so investors may get back less than they invest. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. The Fidelity Asia Fund has the potential of having high volatility either from its composition or the techniques used to manage it. The fund can use financial derivatives which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in small and emerging markets can be more volatile than other more developed markets. Changes in currency exchange rates may affect the value of investments in overseas markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Investments should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document and current and semi-annual reports, free of charge on request, by calling 0800 368 1732. Issued by Financial Administration Services Limited and FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0220/25220/SSO/NA
