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ôGoing forward, the key thing is to focus on the stock level,ö Lo says. ôWhen the liquidity flows come in and out, a lot of the stocks will be hit anyway. So itÆs best to go for the blue-chips, the stocks that you know are fundamentally sound.ö
Going back to the basics of investing is also a must, Lo says, adding that was how many investors survived the 1997 Asian financial crisis, which saw many poorly managed companies fall to the wayside. She suggests investors pay closer attention to cash flow, balance sheets and earnings.
ôSticking with blue-chips, stocks that are fundamentally sound will make you survive and do better during this time,ö Lo says. ôOur experience in the 1997 Asian financial crisis taught us we should go back to the blue-chip stocks with strong balance sheets.ö
SchrodersÆ Asian equities portfolios are more focused on domestic consumption and infrastructure-related companies, as well as companies with strong cash flow.
Domestic consumption and infrastructure are becoming a common theme among fund managers, but Lo says thatÆs not a problem because Schroders was already positioned in these sectors long before the worries of a US recession became the main focus of investors.
ôWhen the earning downgrades come, the negative sentiment will worsen. That will give investors another opportunity to enter Asian stockmarkets at the low level,ö she says.
Some of the banks and the China property companies are still on the high side in terms of share prices, Lo notes. ôWe have yet to see them come down really. We just need the last leg of redemption to come, all the retail money to get out of the market, and then we will see another opportunity to come in.ö
Within Asia, Schroders is underweight in Korea, Taiwan and China. It is overweight in most Southeast Asian markets, especially Malaysia and the Philippines.
ôThe more bombed out markets are starting to look more interesting. Malaysia and the Philippines are more isolated from the global economy,ö she says.
The Philippines is benefiting from the overseas remittances, which are quite strong. In terms of the political front, Lo notes that actual progress is being made. The main risk for the Philippines is if the external factors actually impact the country, she says.
Malaysia is also a strong domestic consumption story. But Schroders has started to sell some of its holdings there and has been putting the money elsewhere, she says, because it has been satisfied with the marketÆs performance in recent months.
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