India and Japan are the two countries offering consistent flows in Asia at the moment, and both countries have “immense” opportunities for investors, according to Robert Horrocks, CIO of Matthews Asia.
“For Japan, I give a big slice of the credit to the Bank of Japan governor Haruhiko Kuroda,” Mr Horrocks said, adding that he is the best central bank governor in the world as he knows how to manage monetary policy in a zero-interest rate environment. Mr Horrocks also praised the initiatives taken by the Indian prime minister Narendra Modi in bringing investor confidence back – especially his initiatives relating to corporate reforms.
The Matthews Asia fund invests heavily in Asian markets with special focus on China, Japan and India. On China, Mr Horrocks said the current broad-market sell-off offers an opportunity to invest in high businesses with strong dividend growth potential at attractive valuations.
He said investors had very polarised responses to China after the devaluation. Some pointed to the 1987 crash when the Chinese economy was deflating, while others said the devaluation means there are opportunities for investors.
“I don’t think China is doomed at all,” said Mr Horrocks. “It has some issues to work with, but definitely not doomed.”
In comparison with 1987, the situation in China is much better, Mr Horrocks explained, adding the Asian economies are much more steady now compared with then and the Chinese economy is in a reflating mode.
On challenges such as a rate hike from the US Federal Reserve and its impact on the emerging Asian economies, Mr Horrocks said the impact would be driven by the commodity exposure of these countries. “It is not just about the emerging markets now but also about external factors such as commodity prices,” he said.
The $404m (£264m) Asia Dividend fund aims to benefit from rising consumption in Asia and holds a significant overweight in the consumer staples, consumer discretionary and telecommunication services sectors. It follows the MSCI All Country Asia Pacific index.
In the third quarter of this year, the fund saw the main contributors to performance come from holdings in South Korea. In terms of sectors, materials and utilities held up relatively well, while the portfolio’s financial holdings were among the main performance detractors.
