Deep Dive: European investors miss out on €200bn a year by not holding Asian stocks

Undervalued by 20%

European investors’ “home bias” and aversion to Asia-Pacific stocks comes at a cost, according to Peter Monson, senior portfolio manager at Nikko Asset Management, who argued they are potentially missing out on €200bn worth of returns every year.

Referring to research conducted by Olaf Stotz at the Frankfurt School of Finance, Monson said the associated costs of this bias for European investors was "substantial" and led to them forgoing risk‐adjusted returns of over 1.3% per annum by not being invested in the sector he described as the "most underrepresented region in global investors' portfolios". The study also showed that Asia-Pacific (ex-Japan) stocks were undervalued by almost 20%, which results in Asian stocks' valuation not fully reflecting "the potential of human capital or valuation ratios, which may help predict stock r...