The number-one question being asked by clients and prospects these days is: “Is it too late to own Asian equities?” So says Richard Evans, Edinburgh-based portfolio manager at Martin Currie Investment Management.
His response is that he is bullish on a very narrow universe of stocks.
Evans runs a portfolio valued at around $300 million of highly concentrated stocks, no more than 50 (and currently fewer than 30). He regards these names as likely outperformers over a five- to10-year horizon.
“It’s not a deep value strategy,” he says. “It’s a high-quality one.”
He acknowledges that many investors looking to take advantage of the Asia growth story are increasingly desperate to gain access. Such desperation stung in late 2008 and much of 2009, when many Asian stock markets badly underperformed US indices, despite the region’s better economic fundamentals.
Since then, many investors in the West want to buy the sexy domestic-demand stories on offer in Asian bourses but have found the prices of these stocks bid up. The beta volatility in emerging markets makes many investors wonder if the moment to buy has passed.
“We don’t pay for the fancy multiples in obvious names,” Evans says. Martin Currie prefers to find more obscure companies with a business that is linked, perhaps indirectly, to domestic demand. For example, to ride the India infrastructure theme, Evans avoids engineering companies in favour of financing companies.
He is a bull on Hong Kong property, and on Malaysia. His biggest underweight is Australia, particularly its banks, which he says are structured the same as those in the United States and Europe but have managed to dodge the crisis only because of Australia’s commodities boom.
But Evans does not make macro calls; he seeks individual companies that will do well throughout a business cycle, and have a track record of treating minority shareholders well.