- Asia is the fastest growing region in the world thanks to its highly diversified economies, its demographic advantages as well as structural reforms; and in Pictet Asset Management's view is today far more resilient due to its better management of the pandemic
- The region is also among the most advanced in terms of themes such as e-commerce and fintech with its companies investing more than many developed peers in research & development, which would drive future growth
Pictet Asset Management's Asian Equities ex Japan strategy aims to invest in companies with sustainably high or improving cash generation and returns, which they think are undervalued and have a strong potential for growth. Find out how to capture the investment potential of Asia.
Reasons to invest in Pictet Asset Management's Asian equities ex Japan strategy:
1. An inefficient market creates investment opportunities
Pictet Asset Management believes Asia ex-Japan is inefficient, as market participants often focus on the short-term over the long-term and earnings (which can be manipulated) over cash. Pictet Asset Management aims to capture investment opportunities primarily across two broad areas where they think the market is either underestimating:
- structural growers – companies that are able to sustain their above average/above market growth rates and returns
- companies that are going through an inflection – where temporarily depressed returns are extrapolated into the future
2. A focused approach
An active, research intensive investment process helps to identify the best investment opportunities. While Pictet Asset Management likes growth stories, they won’t overpay for them. Their investment philosophy incorporates a focus on cash generation whilst maintaining a strong valuation discipline. They believe a portfolio made up of companies like this should be able to outperform across market cycles.
3. Strong local knowledge and presence
The strategy is run by an experienced investment team including regional specialists based in Hong Kong. Together, they hold over 900 company visits a year.
Why invest in Asia ex Japan?
Asia is the fastest growing region in the world thanks to its highly diversified economies, its demographic advantages as well as structural reforms; and in Pictet Asset Management's view is today far more resilient due to its better management of the pandemic. The region is also among the most advanced in terms of themes such as e-commerce and fintech with its companies investing more than many developed peers in research & development (1), which would drive future growth.
Asia is the fastest growing region in the world thanks to its highly diversified economies, its demographic advantages as well as structural reforms; and is today far more resilient due to its better management of the pandemic. The region is also among the most advanced in terms of themes such as e-commerce and fintech with its companies investing more than many developed peers in research and development, which should drive future growth.
Despite their superior growth potential, Asian assets are under-represented in investor portfolios. Pictet Asset Management believes Asian equities are attractive due to the strong earning potential of companies and attractive valuations, especially relative to developed markets.
A pick-up in global activity, better corporate earnings, and receding currency and debt risks across the region all contribute to a positive outlook. Against this backdrop, Pictet Asset Management continues to find companies with strong cash flow, earnings growth higher than the market and compelling valuations.
How Pictet Asset Management manages the portfolio
Pictet Asset Management has over 30 years’ experience investing in Asia equity markets, with offices throughout the region. They take an active approach believing that Asia equity markets are inefficient. Therefore fundamental analysis and judicious stock selection are paramount to success. Arguably this is now the case more than ever as markets open up to foreign investors and disruptive technologies rapidly change industries.
Pictet Asset Management seeks companies, with the best growth potential, using a valuation approach based on cashflow rather than simple earnings. Asia is a complex market and they also take into account Environmental, Social and Governance (ESG) criteria, making them multidimensional stock pickers. Finally, they believe this analysis is best achieved through meetings and engagement with company management using qualitative criteria to score businesses.
(1) Source: Refinitiv Datastream, Pictet Asset Management, February 2021
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
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