Menu Menu Menu Login Login Log in Search Search Search
Top

Asia’s rising stars

Three ways you could profit from the diversity in eastern markets

Important - The value of investments can fall as well as rise, so you could get back less than you invest, especially over the short term. The information shown is not personal advice, if you are unsure of the suitability of an investment for your circumstances please contact us for personal advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).


Kate Marshall

Senior Investment Analyst

Why Asia?

It’s difficult to think of another part of the world quite as diverse as Asia. Filled with different cultures, histories, and languages, the eastern world is full of variety – and this means opportunity for investors.

From Hong Kong and Singapore, already developed into two of the world’s leading financial hubs, to the frontier markets of Vietnam and Cambodia, the differences are dramatic.

Investors in Asia can take advantage of this diversity, combining the exciting growth potential of the higher-risk emerging markets with the more established economies.

One thing all these countries share is a focus on prosperity. While stagnating economic growth and unease over globalisation is increasingly seen in the West, Asian countries are improving their trade links and integrating with others.

A willingness to work hard and determination to develop a global presence binds these countries together.

Our latest suggestions for investing in Asia

A landmark year

June marked 20 years since the Asian financial crisis. The severity of the crisis inspired change and the countries involved worked hard to get back into shape.

Their debt burdens are now typically lower than Western counterparts, which means they are better placed to cope with any future setbacks.

Economic and political developments continue across Asia. And in many cases this is great news for those investing in the region’s businesses.

For example in India, Prime Minister Narendra Modi has implemented sweeping reforms to stamp out corruption and make it easier for companies to do business. This summer he introduced important tax reform, which is expected to improve efficiency and increase company profits over the long run.

What does the future hold?

The pace of change in Asia has been extraordinary. Rising wealth and consumption, combined with an increase in foreign investment and the spread of technology, has transformed Asia’s markets.

Yet I think there’s much more to come. Asia stands poised to become the dominant engine of global growth.

It won’t happen overnight. Political, economic and social uncertainties affect emerging markets more than most. A long-term outlook is therefore essential.

In our view, Asia has a place in most long-term investors’ portfolios. But Asia is an intricate and evolving area, and it takes careful analysis and specialised knowledge to find the companies best-placed to thrive.

That’s why we think most investors are best-served by entrusting their money to a fund manager who’ll pick the companies for them.

Here I highlight two of our favourite fund managers investing in the region, as well as a tracker fund for those who simply want broad exposure to Asian markets.

Our latest suggestions for investing in Asia

Voted Best Fund Platform 2016
Suggestions for investing in Asia

Read now

Richard Troue

Head of Investment Analysis

First State Asia Focus – new addition to the Wealth 150+

  • Wealth and consumption in Asia are rising quickly
  • This fund invests in companies that can benefit
  • Exclusive reduction in ongoing fund charge for HL clients

First State has a long and successful history investing in the Asia Pacific region. The First State Asia Focus Fund is a relatively new addition to their range.

It’s run using a tried-and-tested philosophy.

Manager Martin Lau seeks companies with strong cash flows and an ability to keep costs under control. He also tries to identify companies with a distinct competitive advantage, for example a recognisable brand or a large market share.

High standards of company management are a must. He looks for businesses where the interests of the people in charge are aligned with those of shareholders.

Lau and his experienced team are based in Asia, which lets them visit companies and hear about their plans first-hand. It also gives them an insight into how markets are changing and allows them to spot the companies best-placed to take advantage.

A disciplined approach

We have long admired the team’s disciplined investment approach and hold Martin Lau in high regard. His long-term track record is nothing short of exceptional, as shown in the chart below, though there is of course no guarantee this will continue.

His approach is a conservative one, though Asia remains a higher-risk proposition. He looks for the companies that can prosper over the long term, rather than chasing the latest fad. This means we’d generally expect the fund to hold up well during more turbulent market conditions, although it may also lag behind when markets rise strongly.

Like all stock market investments it can fall in value, so you could make a loss.

The fund is small and nimble in size, which means the team can pounce on opportunities quickly, wherever they may lie.

We recently secured a reduced ongoing charge of 0.75% per year for this fund. This is a significant saving over the standard charge of 0.9% and is exclusively available when investing through HL. Our charge to hold funds of up to 0.45% per year also applies. More on charges

Low charges and a first-rate management team are exactly what we look for when choosing our Wealth 150+, and this fund is the latest addition to the list.

Martin Lau's track record

Past performance is not a guide to future returns

Source: Lipper IM, 30/11/17

Annual percentage growth
Nov 12 -
Nov 13
Nov 13 -
Nov 14
Nov 14 -
Nov 15
Nov 15 -
Nov 16
Nov 16 -
Nov 17
First State Asia Focus N/A* N/A* N/A* 27.3 22.4
FTSE AW Asia Pacific ex Japan 5.5 9.4 -7.6 31.7 19.6

*Full year performance not available

Past performance is not a guide to future returns

Source: Lipper IM to 30/11/17

Fund information

Investment goal: Growth
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.90% p.a.
Ongoing saving from HL: 0.15% p.a.
Net ongoing charge: 0.75% p.a.
Vantage service charge: 0.45% p.a.
Maximum overall charge: 1.20% p.a.

View Key Investor Information Document

View our charges

Invest in First State Asia Focus

Add First State Asia Focus to watchlist

More investment options

First State Asia Focus

Invest now

Kate Marshall

Senior Investment Analyst

More investment options

The Schroder Small Cap Discovery Fund differs from most funds investing in Asian and emerging markets, as it focuses on higher-risk smaller companies. Meanwhile the iShares Pacific ex Japan Equity Index Fund could make a great choice for those seeking a straightforward way to invest in Asia at a very low cost.

2016 best investment platform

Voted Best Investment Platform 2016

Investment idea

Schroder Small Cap Discovery

  • A unique way to invest in Asian and emerging markets
  • Investments in higher-risk smaller companies set this fund apart

As developing economies mature, a wider range of opportunities opens up to investors.

Improved infrastructure and education fosters innovation, while rising wealth helps to boost consumption. The number of small, entrepreneurial business increases in response and the Schroder Small Cap Discovery Fund aims to benefit.

The fund invests in innovative smaller companies located across Asian and emerging markets. It can also invest in firms based elsewhere, but which earn a high share of profits from these markets.

These companies could turn into tomorrow’s market leaders and investors have the potential to benefit from their growth in the meantime.

Smaller companies tend to be under-researched by investors. We feel this provides an opportunity for fund managers willing to scour the market and unearth hidden value. Investing in both smaller companies and emerging markets makes this a higher-risk fund.

Matthew Dobbs, who manages the fund alongside Richard Sennitt, is a highly-experienced investor in Asian companies and has built a strong long-term record.

The managers believe many developing economies will switch from a focus on exports to domestic consumption, so the fund currently has a bias towards consumer sectors.

Like all investments the fund will fall as well as rise in value, so you could lose money.

The focus on smaller companies really sets this fund apart from other Asian and emerging markets funds. We think it could sit well alongside funds with a greater focus on larger firms, such as the First State Asia Focus Fund also reviewed here.

Schroder Small Cap Discovery - top 10 sectors

Source: Schroders - correct at 30/11/17

Fund information

Investment goal: Growth
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.98% p.a.
Ongoing saving from HL*: 0.26% p.a.
Net ongoing charge: 0.72% p.a.
Vantage service charge: 0.45% p.a.
Maximum overall charge: 1.17% p.a.

* This saving is delivered via a loyalty bonus, which may be subject to tax outside an ISA or SIPP.

View Key Investor Information Document

View our charges

Schroder Small Cap Discovery

Invest now


Investment idea

iShares Pacific ex Japan Equity Index

  • A low-cost way to invest in Asia
  • Aims to track the performance of a broad index of shares

This is our favoured passive option for investors seeking a straightforward way to invest in the region.

It invests in countries across the Asia Pacific sector, from Thailand and Malaysia to Australia and Singapore. The aim is to track the performance of the FTSE AW Asia Pacific ex Japan Index. This currently comprises more than 500 companies.

The fund has an exceptionally low ongoing charge of 0.13%, which makes it one of the cheapest in its sector.

Charges are a key factor in tracker fund performance, so this low fee should make a real difference over the long term. Our charge to hold funds of up to 0.45% per year also applies.

Fund information

Investment goal: Growth
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.19% p.a.
Ongoing saving from HL: 0.05% p.a.
Net ongoing charge: 0.14% p.a.
Vantage service charge: 0.45% p.a.
Maximum overall charge: 0.59% p.a.

View Key Investor Information Document

View our charges

Annual percentage growth
Nov 12 -
Nov 13
Nov 13 -
Nov 14
Nov 14 -
Nov 15
Nov 15 -
Nov 16
Nov 16 -
Nov 17
iShares Pacific ex Japan Equity Index 6.4 4.6 -9.0 34.2 16.9
Schroder Small Cap Discovery 14.0 20.1 -5.2 21.4 13.4
FTSE AW Asia Pacific ex Japan 5.5 9.4 -7.6 31.7 19.6
FTSE Emerging 0.6 10.0 -14.1 32.9 18.4

Past performance is not a guide to future returns

Source: Lipper IM to 30/11/17

iShares Pacific ex Japan Equity Index

Invest now