Teera Chanpongsang, Portfolio Manager, Fidelity Asia Fund, explains how the Asian equity universe is both expanding and maturing
Asian equities: how has the investable universe changed over the last 20 years?
Over the last 20 years, China's weighting in the MSCI Asia ex Japan Index has increased from less than 1% in 1999 to around 37% now. This is set to rise further when the MSCI scales up the A-share inclusion by the end of 2019. The rising representation of China in broader Asian indices is an acknowledgment of the size and importance of China's economy for this region. It also indicates the structural shifts taking place within China: today a variety of companies are listing in Hong Kong and the US, besides domestic stock markets.
The stock market is reflecting what is unfolding at ‘ground level'. For instance, domestic consumption opportunities have changed from investing in department stores and supermarkets to investing in e-commerce, social networking apps, gaming and so on. The listing of Alibaba, the flagship Chinese ecommerce company, in 2014 and its subsequent growth as a stock market giant is emblematic of this.
Nonetheless, sound investment ideas come from consistently monitoring changes that are unfolding in consumer behaviour, new business models, and even new industries that are emerging. The structural shift that is underway in Asia has a long runway of growth even now and there are a host of opportunities to be discovered.
What key areas of risk have you identified in the region and how are you mitigating them?
I believe that the best way to understand risk is to understand the company I'm investing in, its industry and the countries it operates in through on-the-ground research. I focus my risk control on stock selection and ensuring the robustness of individual investment theses in the fund. I believe that the most effective way of mitigating external risks to any business is to assess the experience, responsiveness and resilience of management teams that are responsible for the businesses the fund invests in.
This information is for investment professionals only and should not be relied upon by private investors. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. Fidelity's range of Asian equity funds have the potential of having high volatility either from their composition or the techniques used to manage them. The funds can use financial derivatives which may expose them to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Investments in small and emerging markets can be more volatile than other more developed markets. Changes in currency exchange rates may affect the value of investments in overseas markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Investments in Fidelity funds should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge on request by calling 0800 368 1732. Issued by FIL Pensions Management, authorised and regulated by the Financial Conduct Authority and Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0419/23974/SSO/NA