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Asia & Emerging Markets

Asia & Emerging Markets sector

The Asian and emerging markets cover a broad range of countries at varying stages of economic development.

Kate Marshall - Senior Investment Analyst
9 March 2021

Asian and emerging market investing can give you access to a broad range of countries. From Asia to Eastern Europe, and South Africa to Latin America, these regions offer a range of countries at different stages of economic development. Some are rich in commodities and natural resources, some rely on exporting goods to Western economies, and others have vibrant local consumer-driven growth.

These markets have grown rapidly in recent decades. As young, emerging economies, they tend to offer greater growth opportunities than the West. This comes with higher investment risk and more volatility though.

Funds investing in the region have different areas of focus:

  • Emerging markets funds – offer broad exposure to global emerging economies, from Brazil to Malaysia and India to Turkey
  • Asia ex Japan funds – invest exclusively in Asian markets, such as China and the Philippines. Some focus on mature economies, including Hong Kong, Singapore and Australia
  • Regional funds – others focus on a specific region such as Latin America, including Brazil and Chile, or Eastern Europe, which includes Russia
  • Country funds - these funds mainly focus on individual countries, such as India or China

HL View

Asian and emerging markets have gone from strength to strength. Rapid industrialisation, growing populations, and a desire to succeed have helped transform developing countries into economic superpowers. Domestic consumption is set to be a key driver of growth over the coming years, helped by a young and growing population, and rising wealth.

These countries have also become hotbeds of innovation. Some countries are at the forefront of technology and many companies located there are overtaking Western competitors.

Asian and emerging countries are quite different from each other, so this part of the world can be home to both the best and worst-performing global stock markets at any one time. That’s why we think a diversified approach is sensible when it comes to investing in these markets.

If you’re looking to invest in emerging markets and are happy with the associated risks of doing so, we think a broad global emerging markets or Asian fund is likely to be a good starting point. Other funds could then be added to a portfolio for additional exposure to a particular theme, area, or country.

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Wealth Shortlist funds in this sector

Funds chosen by our analysts for their long-term performance potential

See the Wealth shortlist

Asian and emerging stock markets fell sharply last February and March. Like many other global markets, they were hit by the coronavirus pandemic, which led to the widespread shutdown of businesses and economies.

They have since made some recovery though. Over the past year, the FTSE Emerging Index has grown 14.8%* while the FTSE Asia Pacific ex Japan Index has grown 21.2%*. Some countries have fared better than others though, especially as some non-Asian emerging economies haven’t fared as well in handling the virus.

Korea and Taiwan were two of the best performing, with returns of 41.8% and 40.3%. China wasn’t far behind with growth of 36.0%. During a time when at-home tech and delivery services have been in demand, large tech businesses have done well. This includes companies like TSMC (Taiwan Semiconductor Manufacturing Company), Korea’s Samsung Electronics, and Chinese internet platforms Alibaba and Tencent.

Areas including health care and consumer goods have also held up well. These sectors usually do well in uncertain times because they produce goods that tend to stay in demand even when the outlook for the economy is uncertain.

At the other end lie the Latin American markets, falling 22.0%* over the past year. Brazil has been noticeably weak with a loss of 26.0%. Emerging European markets have performed poorly too. Russia, which makes up a large part of the eastern European market, has fallen 19.3%. The oil & gas sector has been one of the weakest, damaged by an oil price slump earlier in 2020. This was painful for oil exporters like Russia. There are signs commodity prices could recover as economies open, though there are no guarantees.

Tourism-based economies have been hit, with a loss of 7.1% for the share prices of travel & leisure companies over the year. The financial sectors also haven't done so well. Banks across the globe have suffered for several reasons, including declining interest rates and the likelihood of dealing with loan losses following the crisis.

Asia and emerging stock markets - performance

Past performance is not a guide to future returns. Source: *Lipper IM, correct as at 31/01/2021.

Across global markets, any withdrawal of the economic stimulus we’ve seen so far, could impact markets. That said, emerging economies have generally taken a different range of measures, so any withdrawal in these markets might not appear as severe.

What should matter the most to investors is the long-term outlook for the companies they invest in. Asian and emerging markets are still home to some exciting trends that are expected to develop over the coming years – even with events like this along the way.

Rising wealth could help towards the next stage of growth, and these markets are also supported by hard working populations keen to catch up with consumers in the west. This could help companies across a range of sectors, including technology, retail and financial services.

These markets could be an interesting place for investors prepared to accept the higher risks and volatility of investing in emerging markets. But we suggest only if a long-term view of at least 5-10 years can be taken.

Annual percentage growth
Jan 16 -
Jan 17
Jan 17 -
Jan 18
Jan 18 -
Jan 19
Jan 19 -
Jan 20
Jan 20 -
Jan 21
FTSE Asia Pacific ex Japan 39.2% 20.6% -6.4% 6.9% 26.9%
FTSE China 39.5% 37.6% -13.4% 5.6% 42.1%
FTSE Emerging 43.3% 22.0% -6.5% 6.1% 20.0%
FTSE Emerging Europe 52.8% 15.5% -1.7% 22.9% -13.5%
FTSE Latin America 67.4% 14.5% 3.1% -1.4% -18.7%

Past performance is not a guide to the future. Source: Lipper IM to 31/01/2021.

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Five year performance

  • FTSE Asia Pacific ex Japan

    +113.2%

  • FTSE Emerging

    +107.9%

Data correct as at 31/01/2021. Please remember past performance is not a guide to future returns.

Our Wealth Shortlist features a number of funds from this sector, selected by our analysts for their long-term performance potential. The Shortlist is designed to help investors build and maintain diversified portfolios. To use the Shortlist, you should be comfortable deciding if a fund fits your investment goals and attitude to risk. For investors who don't feel comfortable building and maintaining their own portfolio we offer ready-made solutions, which are aligned to broad investment objectives. For those who want personal recommendations, you can also ask us for financial advice.

The fund reviews below are provided for your interest but are not a guide to how you should invest. For more information, please refer to the Key Investor Information for the specific fund. Remember all investments and income from them can fall as well as rise in value so you could get back less than you invest. Past performance is not a guide to the future.

There is a tiered charge to hold funds with HL. It is a maximum of 0.45% p.a. - view our charges. Comments are correct as at 31 January 2021.

Wealth Shortlist fund reviews

This fund focuses on the Indian stock market, with a bias towards smaller companies. We think India has excellent long-term growth potential, though a fund focused on a single emerging country is a high-risk option so it should only make up a small portion of an investment portfolio. This fund could sit well alongside those that invest across the globe or more broadly across Asia. Investments in smaller companies could boost growth but are also higher risk, so a long investment outlook is essential.

Vazirani has delivered strong returns for investors since his fund management career began more than two decades ago. However, since the start of 2018 the share prices of smaller businesses have been much weaker than larger ones and this has hurt the fund. Some of the manager's individual stock picks also haven't gone well over this time. Remember past performance isn’t a guide to future returns.

Overall, we like the fact Jupiter India invests differently. This gives it the potential to perform better than the Indian market, as it has done over longer periods, though the reverse is also true.

This fund aims to pay a regular income and grow an investment over the long term. It could form part of an income portfolio, or help to diversify the Asian portion of a global portfolio. If you choose to reinvest any income, it could boost future growth potential. Investing in Asia, along with the flexibility to invest in some emerging markets, makes it a higher-risk option.

Jason Pidcock is one of the first UK fund managers to run an Asian fund focused on income, rather than purely growth. He set up his first Asian income fund in 1995 and has since built a strong reputation in this space. The manager likes to keep things simple and looks for companies that pay an attractive income, and have the potential to grow dividends over time. Companies that make plenty of cash, have low levels of debt and are in good financial health are favoured. They should also be run by robust management teams, and having regular contact with them is key to the manager's process.

This fund invests in a fairly small number of companies, which increases risk. Its charges are taken from capital, which could boost income but erode the potential for capital growth.

This fund invests in developed Asian economies, such as Singapore and Hong Kong, as well as higher-risk emerging countries including India and Taiwan. The managers try to achieve more stable returns compared with others in the Asia sector, so the fund could fit with other Asian funds that use a different or more adventurous investment approach, or form part of a broader global portfolio with a long-term outlook.

Martin Lau is the fund's lead manager. He's one of the industry's most highly regarded Asian fund managers and has invested in the region for more than two decades. He has an excellent long-term track record, and runs the fund in a conservative way. It means the fund has tended to hold up relatively well when markets have been rocky, but has lagged behind when they’ve risen strongly. Past performance isn’t a guide to future returns.

At the moment the fund mainly focuses on sectors that could benefit from rising consumer spending, such as technology, financials, and companies that produce consumer staples such as food and beverages.

This fund focuses on the Greater China region, and invests in companies based in, or that carry out most of their business in, China, Hong Kong or Taiwan. It could form part of a broader global portfolio, or diversify the Asian and emerging markets equities portion. We think China has excellent long-term growth potential, though a fund focused on a single emerging country is a high-risk option so investors should expect volatility and it should only make up a small portion of an investment portfolio.

This fund is run by a manager and team with a great pedigree of investing in China. Martin Lau, the fund's lead manager, has an impressive record in this sector, and he also has the support of other experienced investors. We like the team's culture and philosophy - they view themselves as stewards of investors' capital, looking after it as though it's their own.

Lau and his team are conservative in the way they manage money and they aim to limit losses in a falling market. They do this by investing in companies they think will see consistent demand for their products or services and prosper over the long term, rather than chasing short-term fads.

This fund invests in smaller businesses that are based in Asian and emerging markets, or make most of their money in these areas. Smaller and more innovative businesses offer lots of growth potential, but they're higher risk because they're at an earlier stage of their development. Investing in emerging markets is higher risk too. The fund could therefore be used in a portfolio that's in search of higher potential long-term returns, but can accept more volatility. We think it could fit well with Asian and emerging markets funds focused on larger firms, but should only form a smaller part of an investment portfolio.

Matthew Dobbs stepped back from managing this fund on 1 January 2021. Dobbs' long-term colleagues Robin Parbrook and Alex Deane took over as co-managers. Dobbs has delivered excellent performance across his funds over the years so it’s disappointing to see him step back, but he has committed to continuing to work with the new managers until the end of 2021, offering guidance where needed. Parbrook is another experienced manager, having joined Schroders in 1990. Deane has less experience, though has worked closely with Dobbs since joining Schroders in 2015. The new fund managers will use the same long-standing investment process.

This fund aims to provide growth by investing in larger companies across Asia, based in countries such as China, Taiwan and South Korea. It could fit a broader investment portfolio that can have some exposure to a more adventurous fund, which includes higher-risk emerging markets and smaller companies, in the pursuit of long-term growth. The fund could be used as part of a globally diversified portfolio and provide key exposure to Asian markets. The potential use of derivatives also increases risk.

Matthew Dobbs will step back from managing this fund on 31 March 2021. His long-term colleague Richard Sennitt will take over as lead manager, with support from Abbas Barkhordar. While it’s disappointing to see Dobbs step back, he has committed to continuing to work with the new managers until the end of 2021, offering guidance where needed. Sennitt is also experienced, having joined Schroders in 1994 to cover Far Eastern markets. Barkhordar joined Schroders in 2007 and has since been an analyst on the Emerging Markets Equities team. The new fund managers will use the same long-standing investment process, and continue to work closely with the wider Asian Equities team.

This fund aims to track the performance of the broader emerging stock market, as measured by the FTSE All-World Emerging Index. It's currently made up of around 1,400 companies, and is focused towards sectors such as financials, technology and consumer-related businesses.

The fund invests across emerging countries, including China, India, Brazil, South Africa and Taiwan. We think it's a convenient way to invest in the emerging markets, and could be used as a way to diversify a long-term, global investment portfolio. These markets are higher risk as they're at an earlier stage of development, so this fund should only be considered for a portfolio with a longer investment outlook that can accept periods of volatility.

This fund aims to track the performance of the broader Asian stock market, as measured by the FTSE World Asia Pacific ex Japan Index. It's currently made up of around 600 companies, and is focused towards sectors such as financials, technology and industrial businesses.

The fund invests across the Asia Pacific region, which includes developed countries such as Hong Kong, Singapore, and Australia, as well as less mature economies like Taiwan and Malaysia. Emerging economies are a higher-risk place to invest, so a long-term outlook is important. We think the fund's a convenient way to invest in Asian markets, and could be used to diversify a long-term, global investment portfolio.

This fund provides broad exposure to the higher-risk emerging markets, which makes it a more adventurous way to try to grow your wealth over the long term. It could help diversify a global portfolio focused on long-term growth, and sit well next to funds that mainly invest in developed markets.

The fund has outperformed the broader emerging stock market since launch. This is no mean feat as most emerging markets funds struggle to grow more than this benchmark over such a prolonged period. There have been periods when the fund has underperformed though, and this will happen at times in the future too. Remember past performance isn't a guide to future returns.

Leon Eidelman is lead manager of this fund, alongside co-manager Austin Forey. While the managers have plenty of experience investing in emerging markets between them, they also draw on a well-resourced team for ideas and analysis. They look for high-quality companies they believe can sustain earnings growth over the long term.

This fund focuses specifically on the Indian Subcontinent, with the aim to provide long-term investment growth. It mainly invests in Indian companies, though it can also invest in Pakistan, Sri Lanka and Bangladesh. We think the fund could sit well alongside those that invest across the globe or more broadly across Asia. India has excellent long-term growth potential, but a fund focused on a single emerging country is a high-risk option so it should only be considered as a small portion of an investment portfolio.

Sashi Reddy and David Gait manage the fund. They are both highly experienced fund managers in Indian and Asian equities. We like their focus on stewardship, sustainability and high-quality companies. They like cash-generative businesses, which are in good financial health which they think could withstand periods of economic volatility. The managers also put emphasis on businesses' people and culture, and only invest in companies they believe are run by management teams with integrity. They also invest in some smaller companies, which are higher risk than their larger counterparts.

This fund invests in a wide range of Asian markets, including both established and less-developed economies such as China, India and Taiwan. This means it could provide broad exposure to the Asia Pacific region and help diversify a global portfolio with a long-term view. Funds that focus on other regions, or specific countries, could be added alongside this one as part of a broader investment portfolio. The fund includes some investments in emerging markets, which adds risk.

Aberdeen Standard Investments is home to one of the most experienced teams investing in Asian companies. Hugh Young is Head of Asia Pacific and, along with Flavia Cheong, leads the team looking after this fund. He was instrumental in setting up the group's Asian equities strategy and has been involved with this fund's management since 1987. We view it positively that he's still a part of the team.

Companies in good financial health, run by robust and trustworthy management teams are favoured by the team. They often look for a change that could help boost profits in future, such as a new product or change in the use of technology. They sometimes invest in out-of-favour companies that can be bought at a more attractive share price.

This specialist fund focuses on the main markets of Latin America, including Brazil, Mexico, Chile and Peru. We think it could provide a way to diversify a portfolio invested in broader global or emerging markets funds. Higher volatility and risk should be expected from a fund like this, given it focuses on a small group of emerging economies. It should therefore only be considered to form a small part of a wider investment portfolio, focused on long-term growth.

The fund is run by a team with one of the longest records of investing in a dedicated Latin American fund. We like their long-term focus, but willingness to be flexible in the hunt for the best opportunities. They aim to find companies that can generate fairly steady rates of growth, which have been overlooked by others, and hold onto them for many years.

The fund currently has a bias towards consumer-related businesses that could benefit from rising wealth and consumer spending, but the team aims to have at least some exposure to most major sectors.

Latest research updates

FSSA Asia Focus: February 2021 fund update

FSSA Asia Focus: February 2021 fund update

Tue 02 March 2021

In this fund update, Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of the FSSA Asia Focus Fund.

ASI Asia Pacific Equity: December 2020 fund update

ASI Asia Pacific Equity: December 2020 fund update

Wed 06 January 2021

In this fund update, Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of the ASI Asia Pacific Equity Fund.

Jupiter Asian Income: November 2020 fund update

Jupiter Asian Income: November 2020 fund update

Wed 16 December 2020

In this fund update, Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of the Jupiter Asian Income fund.

JPMorgan Emerging Markets - October 2020 fund update

JPMorgan Emerging Markets - October 2020 fund update

Tue 03 November 2020

In this fund update, Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of the JPMorgan Emerging Markets Fund.

iShares Emerging Markets Equity Index: October 2020 fund update

iShares Emerging Markets Equity Index: October 2020 fund update

Tue 27 October 2020

In this newly enhanced fund update, Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of the iShares Emerging Markets Equity Index fund.

Investment notes

Please note the research updates are not personal recommendations to trade. If you are unsure of the suitability of an investment for your circumstances please seek advice. Remember all investments can fall as well as rise in value so investors could get back less than they invest.

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