Partner Insight: Sustaining returns in Asia's new world
Fidelity Emerging Asia Fund’s Dhananjay Phadnis says a focus on sustainability could help identify Asia’s long-term winners.
The Covid-19 crisis has provided Asian companies with a unique opportunity to look beyond the narrow focus of how to meet this year's financial targets. As a long-term investor, I've been encouraged that an increasing number of companies are clearly using this crisis as an opportunity to protect and enhance the long-term value of their businesses. This is in sharp contrast to the market's traditional focus on short-term earnings.
Author Alex Edmans, in his book titled ‘Grow the Pie: How Great Companies Deliver Both Purpose and Profits', argued that companies that adopt a pie-growing mindset - aiming to improve value for all stakeholders rather than putting one ahead at the expense of the other - will be the companies that can deliver sustained value creation.
In that sense, while it may seem like shareholders have been at the receiving end of the crisis-related pain through earnings cuts, lower dividends and reduced share buybacks, the reality could be that many companies will be able to enhance stakeholder value by cushioning the impact for at least some of them during this crisis. We have been able to map this transformation of corporate purpose through a post-crisis survey of more than 140 of our analysts worldwide.
Over half of the responses indicated an increase in company plans to step up focus on workers, consumers and the wider community as a result of the pandemic. Notably, for our analysts based in Asia this figure was over 60%.
At a company level, we've seen several examples of this long-term approach over recent months, in sectors as diverse as dairy products producers, banking, sportswear, and healthcare.
Important information
This information is for investment professionals only and should not be relied upon by private investors. The value of investments can go down as well as up and you may not get back the amount invested. 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. Changes in currency exchange rates may affect the value of an investment in overseas markets. Investments in emerging markets can be more volatile than other more developed markets. The Fidelity Emerging Asia Fund can use financial derivative instruments for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The fund has the potential of having high volatility either due to its composition or portfolio management techniques. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. A focus on securities of companies which maintain strong environmental, social and governance (ESG) credentials may result in a return that at times compares unfavourably to the broader market. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security's ESG credentials can change over time. 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. UKM1020/32301/SSO/0320
