Recent commodity price weakness could have a significant impact on economies across the globe. In Asia, where economic growth compares favourably to that of developed markets, falling commodity prices is increasingly supportive given Asia is a significant importer. At a corporate level, lower prices could prove supportive for earnings growth.
China, a country which has historically been a major commodities importer, continues to transition towards a more sustainable economic growth environment with a focus on domestic consumption. Stuart Parks, manager of the Invesco Perpetual Asian Fund, does not expect the transition to be smooth, but expects a force for change could ultimately prove positive not only for China, but for wider Asian markets.
At present, 36% of the fund is invested across China and Hong Kong. While the manager had previously tended to avoid Chinese banks, he has recently introduced a holding in the Bank of China. According to Stuart Parks, the bank has an extensive international network leaving it well positioned to benefit from the gradual opening-up of China's capital markets. He also views the valuation of its shares as undemanding. China Resources Power, which operates coal-fired power plants, has also been added to the portfolio.
Overall, Stuart Parks focuses on businesses that possess what he considers to be strong competitive advantages and undervalued earnings growth prospects. He continues to favour the Asian consumer growth story, though he prefers to hold companies with indirect exposure to the theme, such as financial groups, internet companies and electronic component manufacturers.
Within the latter, the manager has added new positions including Samsung SDI which he expects will benefit from the long-term development of its energy storage system and electric vehicle battery businesses. Taiwanese manufacturer Yageo has also been added, which has targeted an increased dividend pay-out supported by its strong cash flows.
Our view on this fund
Stuart Parks has a good long-term track record investing in Asian stock markets. He has managed the Invesco Perpetual Asian Fund for a decade and over this time the fund has returned 220.4% compared with 203.1% for the benchmark and 186.9%* for the average fund in the sector, though please remember past performance is not a guide to future returns. With emerging markets a long term horizon is essential, giving investors time to ride out the ups and downs of this higher risk sector.
|Annual percentage growth|
| Jan 10 -
| Jan 11 -
| Jan 12 -
| Jan 13 -
| Jan 14 -
|Invesco Perpetual Asian Fund||27.1%||-16.3%||16.3%||2.6%||12.8%|
|IMA Asia Pacific ex Japan||21.8%||-16.3%||17.0%||0.4%||11.4%|
|MSCI AC Asia Pacific ex Japan||22.4%||-14.7%||17.9%||-0.1%||11.2%|
Past performance is not a guide to future returns. Source: Lipper IM* to 02/01/2015.
Over time, our analysis suggests Stuart Parks has added some value through stock selection, though sector positioning has detracted from returns. This fund primarily focuses on larger companies and while it has outperformed over a longer period, performance has tended not to deviate significantly from the broader Asian market. In our view, there are other funds in this sector with greater potential to outperform over the long term and as such, the fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.
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