Asia more than just China in equities search

Australian financial planners have been urged to look beyond China and Japan for Asian equities, with emerging and growth economies being overlooked. 

PM Capital Emerging Asia Fund portfolio manager Kevin Bertoli said that China equals Asia in the minds of many, which overlooks growing markets and economies such as Malaysia and the Philippines. 

Bertoli said these latter markets are still in growth phase as they have an emerging consumer class among a growing younger population compared with China and Japan, which have large ageing populations. 

“South-east Asia has growing economies with increasing levels of education, consumption and household savings compared with China, Hong Kong and Taiwan that have ageing populations that are still relatively poor,” Bertoli said. 

According to Bertoli these latter countries have experienced a net economic migration, with growth-creating resources moving out of the economy while they their populations aged compared with South-East Asia where the reverse is happening. 

“The average age in China is over 40 but they are not able to generate personal wealth fast enough to match the ageing population, while in emerging Asian markets the average age is 25-30,” Bertoli said. 

“The recent focus on Asia from Australia has resulted in people seeing decreasing value but that’s because they are looking at China and Japan while small cap equities in South-East Asia fly under the radar.” 

Bertoli said Australian investors had benefited from the increased demand for commodities in China, but this would break down in time and planners should separate Asian investments into two parts. 

“Fixed asset investments such as infrastructure in China are reaching the end of the road, but domestic consumption in other markets is taking off while consumer products and new media are picked up by younger generations in those markets,” he said. 

“There are sectors in Asia that are looking like the US 20 years ago and while commodities have gone up and down with Asian economies, consumer-driven stocks have grown consistently despite other market conditions.”