Asia's economies are of undoubted strength. Much has been made of their swift recovery from the financial crisis, but in reality the shift of economic power from West to East is a multi-decade theme. As developed markets stagnate, Asia is driving global growth - economic growth in Asia is expected to be 6.5% in 2013, compared to 2.0% for the UK.
Asia's success is underpinned by a stable financial system and lower debt than the West. This gives governments leeway to increase spending and boost growth. The Chinese government recently approved an increase in spending on infrastructure and education. South Korea is cutting taxes and expanding social welfare programmes. Thailand is also cutting taxes, and following last year's flooding is spending on flood prevention. Spending on health, infrastructure and other projects has scope to increase across the region, which could prove a further boost.
For long-term investors there have been few better places to put their money over the past couple of decades. Yet over the past couple of years, Asia's economic success has not been reflected in its stock markets. We believe this presents an opportunity for adventurous investors.
There are signs many Asian economies are ready for the next stage in their development, reducing their dependence on exports to the West and rebalancing in favour of domestically driven growth. Consumers in emerging economies are becoming wealthy at a mind boggling rate. There are now more millionaires (in dollar terms) in China than in the USA. However, it is not only the rich who are driving this change - a rapidly growing middle class is pivotal in Asia's development, not only driving demand for essentials such as food and energy, but also 'luxuries' such as cars, technology and branded goods. This transition could ignite stock markets.
This is not to say investing in the region is without risk. Whilst domestic consumption is playing an increasingly central role, many sectors remain vulnerable to a slowdown in key export markets. The region's stock markets are especially sensitive to changes in global sentiment, and are therefore more volatile than their developed market counterparts. Investments in Asia should therefore always be made with the long term in mind. Provided investors are prepared to ride out the inevitable ups and downs, we believe the long-term growth potential is superb.
All this makes choosing the right fund managers crucial. In our opinion there is none finer than First State's Asia team. Their track record is exceptional - since 1988 they have delivered astonishing annual compound growth of 14.7%. This is 5.9% per year ahead of the MSCI Asia Pacific ex Japan Index*. For this calculation we took the record of their Asia Pacific Fund, which closed to new investment in 2003, from which point we used the performance of the Asia Pacific Leaders Fund. Remember, past performance is not an indication of the returns you might receive in future and you could get back less than you invest.
|Annual percentage growth||First State Asia Pacific Leaders||IMA Asia Pacific ex-Japan|
|Nov 07 - Nov 08||-24.3||-43.4|
|Nov 08 - Nov 09||40||55.6|
|Nov 09 - Nov 10||24.2||24.2|
|Nov 10 - Nov 11||1.5||-8.6|
|Nov 11 - Nov 12||14.3||8.2|
* Source: Lipper 30/06/1988 to 01/11/2012
Investors still can access their talents today via the First State Asia Pacific Leaders Fund. Lead manager Angus Tulloch is renowned for his cautious stance. He prefers companies with strong cash flows and growing dividends. He believes such businesses can survive tougher times as well as grow during good times.
A remarkable feature of this fund's performance is the way it has been delivered - the fund exhibits considerably less volatility than most of its peers. Our analysis shows that in months when the fund's benchmark has fallen, it has outperformed 71% of the time. This ability to shelter capital against the worst of market falls, yet still capture much of the upside in a rising market, has been key to the fund's success. Make no mistake, however, this fund still invests in a high risk region, and is not for the faint-hearted.
Angus Tulloch is one of our most highly rated fund managers, and in our view this fund represents a first class choice for investors in this exciting but volatile region. It remains on our Wealth 150 list of favourite funds across the major sectors.
|Fund manager's initial charge||4%|
|HL saving on initial charge||4%|
|Net initial charge||0.00%|
|Fund manager's annual charge||1.5%|
|HL annual saving||0.15%*|
*Annual saving will also be available in the SIPP and Junior ISA from January 2013.