The MSCI Asia ex Japan Index, for instance, is dominated by the big technology names such as Tencent, Alibaba, Samsung and Taiwan Semiconductor. Nearly 32 per cent of the index is weighted to just one sector: information technology, and Chinese companies make up seven out of the top ten holdings.
The index has a higher allocation to two tech stocks - Tencent and Alibaba at nearly 11 per cent, than its entire allocation to the other big emerging economy in the region: India at 9.7 per cent. It’s a similar story for the MSCI Emerging Market index and the FTSE Emerging Index, which both also count Chinese stocks among their top ten holdings.
Individual country indices track large-cap stocks, which again tend to be the big, state-owned players.
Table 1: Major indices covering the region have similar holdings
Source: MSCI, FTSE, June 2018
Where’s the growth coming from?
Economies are not the same as their stock markets, and this is especially true for Asia. If investors are to capitalise on fast-moving industries in the region, they are unlikely to be able to access them through established indices.
There are major structural shifts transforming Asia - the move from offline to online, highlighted by the dominance of e-commerce giant Alibaba, and a growing middle class that is changing its shopping habits and moving up the value chain. There has also been a surge in entrepreneurship which has seen a blossoming of dynamic, new businesses across the spectrum - from fintech and online retail to newly minted enterprises in the gig economy, piggybacking China’s growth story. Most of these more nimble businesses are still to appear on broad market indices. A world awaits the investor willing to explore.
Areas of opportunities
Some of the sectors that are likely to continue benefitting from the Asia growth story are:
Cookware and small appliances: There are two legs to the China story - one is the rising middle class stocking up on modern gadgets and appliances, which plays into the consumption and technology story; and the other is the upper middle class and affluent Chinese upgrading their lifestyle and spending more on travel and luxury items. Zhejiang Supor is part of the first trend, where we see strong demand in the cookware and small appliances sector.
Smartphones: China is the world’s biggest market for smartphones, with shipments of around 100 million every quarter in the last few years. Chinese smartphone manufacturers now account for nearly a quarter of the global smartphone market and continue to grow rapidly. Smartphone camera component maker Sunny Optical Technology which recently reported a pick-up in handset-camera module shipments, reflects the considerable growth opportunities in China’s smartphone market.
Alcoholic beverages: The upmarket consumer trends are reflected by luxury brands such as Kweichow Moutai. The company, which derives its name from Maotai, a small town in South-West China, is known for its fiery-flavoured spirit. The distiller has created a distinct national brand, which plays very strongly into to the aspirational theme among the mass affluent.
Low-cost airlines: Apart from goods, the other big export from China is its tourists, with 145 million overseas trips made in 2017. This has helped boost the travel industry in Asia, enhancing the prospects of travel service provider China International Travel Service Corporation, which has gained from its duty-free business. The expanding army of Chinese travellers will also give a fillip to the airline industry, with carriers such as no-frills airline Cebu Pacific Air likely to benefit.
Dairy: This sector is showing robust growth, thanks to rising demand for flavoured yoghurt and yoghurt based drinks. Sales in this sector have grown in recently years as health-conscious Asian consumers switch to low-fat dairy products. Dairy firm China Mengniu Dairy is one such company that is expected to continue to gain from this trend.
Banking: This is another area characterised by underpenetrated markets. In 2008, for instance, India and Indonesia had nine and seven commercial bank branches per 100,000 adults (1) respectively. By 2016, the number had increased to 14 in India and 17 in Indonesia and we expect this growth (to continue. Private banks with strong and experienced management teams will benefit as financial service penetration continues to increase.
Infrastructure: The logistics industry in India is worth currently around US$160 billion and is likely to rise to US$215 billion by 2020, growing at a compound annual growth rate (CAGR) of 10.5 per cent. Container Corporation of India is a dominant player in the container train operator market in India, with a 70 per cent share in rail container freight. The company is now expanding into logistics parks to provide solutions for foreign and domestic sectors.
Allocation to undiscovered, niche and entrepreneurial firms will help investors tap into fast-moving Asian markets. These quality, ‘all-weather’ companies that perform through the cycle not only offer the potential for higher growth, but also greater diversification within portfolios amid volatile market conditions and growing trade war concerns. Active stock picking, coupled with sound investment research will help investors identify these dynamic, growth-oriented players.
Past performance is not a suitable indicator of future results
Past performance is not a suitable indicator of future results.
(1) International Monetary Fund, Financial Access Survey, World Development Indicators, May 2018
Worauf sollten wir als Nächstes eingehen?
Schicken Sie Ihre Vorschläge per E-Mail firstname.lastname@example.org
Lesen Sie mehr
The value of investments and the income from them can go down as well as up so you may get back less than you invest. Past performance is not a reliable indicator of future results.
These materials are provided for information purposes only and are intended only for the person or entity to which it is sent.
These materials do not constitute a distribution, an offer or solicitation to engage the investment management services of Fidelity, or an offer to buy or sell or the solicitation of any offer to buy or sell any securities or investment product.
Fidelity makes no representations that the contents are appropriate for use in all locations or that the transactions or services discussed are available or appropriate for sale or use in all jurisdictions or countries or by all investors or counterparties.
Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. They are valid only as of the date indicated and are subject to change without notice.
This material was created by Fidelity International. It must not be reproduced or circulated to any other party without prior permission of Fidelity.
This communication is not directed at, and must not be acted on by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. Fidelity is not authorised to manage or distribute investment funds or products in, or to provide investment management or advisory services to persons resident in, mainland China. All persons and entities accessing the information do so on their own initiative and are responsible for compliance with applicable local laws and regulations and should consult their professional advisers.
This content may contain materials from third-parties which are supplied by companies that are not affiliated with any Fidelity entity (Third-Party Content). Fidelity has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content.
Fidelity International refers to the group of companies which form the global investment management organisation that provides products and services in designated jurisdictions outside of North America Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. Fidelity only offers information on products and services and does not provide investment advice personal recommendations based on individual circumstances.
Issued in Europe: Issued by FIL Investments International (FCA registered number 122170) a firm authorised and regulated by the Financial Conduct Authority, FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier) and FIL Investment Switzerland AG, authorised and supervised by the Swiss Financial Market Supervisory Authority FINMA. For German wholesale clients issued by FIL Investment Services GmbH, Kastanienhöhe 1, 61476 Kronberg im Taunus. For German institutional clients issued by FIL Investments International – Niederlassung Frankfurt.
In Hong Kong, this content is issued by FIL Investment Management (Hong Kong) Limited and it has not been reviewed by the Securities and Future Commission. FIL Investment Management (Singapore) Limited (Co. Reg. No: 199006300E) is the legal representative of Fidelity International in Singapore. FIL Asset Management (Korea) Limited is the legal representative of Fidelity International in Korea. In Taiwan, independently operated by FIL Securities (Taiwan ) Limited, 11F, 68 Zhongxiao East Road, Section 5, Xinyi Dist., Taipei City, Taiwan 11065, R.O.C. Customer Service Number: 0800-00-9911#2.