Investing in Asia: what the experts think

China Plus One

China Plus One

When the pandemic hit, many “wrote an obituary for China-focused
globalisation”, said Megan Greene of Harvard Kennedy School in the
FT.
But there’s actually little evidence of it slowing down. US imports
hit “an all-time high” of $288.5bn in September, and China’s trade
surplus has exceeded pre-pandemic levels. True, we don’t know how
the geopolitics will “play out”. But what seems more likely than
deglobalisation is the developing “China Plus One” strategy:
companies keeping factories in China, but hedging their bets
elsewhere. Foreign direct investment (FDI) has thus been growing
fast in Thailand, Vietnam and Malaysia – spelling opportunities for
investors.

Viet opportunity

The market that catches my eye, said Jeff Prestridge in
The Mail on
Sunday^[1], is Vietnam – a
comparatively new Asian tiger, which enjoyed pre-pandemic growth of
7-8%, and seems “set for a big leap”. The Vietnamese stock market
is among Asia’s best performing – up more than 30% this year. More
of the same is predicted for 2022 as corporate earnings recover –
particularly if, as seems likely, Vietnam is reclassified from an
embryonic “frontiers” market to a fully- fledged “emerging” market,
which will attract the big international investors. Three trusts
trading on the London Stock Exchange invest exclusively in
Vietnamese companies: VinaCapital Vietnam Opportunity, Vietnam
Holding and Vietnam Enterprise. But they’re only for “brave
hearts”. A safer bet, says Brian Dennehy of Fund Expert, is a fund
broadly invested across Asia, such as Barings ASEAN Frontiers,
which has 2.5% of its assets in Vietnam.

India’s stealthy bull

Don’t forget India, said Rob Morgan of Charles Stanley in
Investment
Week^[2]. Thanks to a “stealth”
bull market, the country’s main Sensex index is up by almost 50%
over one year. Shares are now expensive, but India “remains unique
among major economies” for its scope for fast growth: predicted at
9% this year, and around 6% in 2022. The country is increasingly
seen “as a natural alternative to China” for outsourcing
manufacturing. If you’re looking for “broad exposure to Asia”, with
a significant Indian exposure, consider the Stewart Investors Asia
Pacific Sustainability fund, which has around 40% of its portfolio
in Indian equities.