CIO designate Sean Taylor gives his take on what Asia has to offer global and emerging markets investors, from growth, to diversification, to innovation.
- Most Asia markets, like many emerging markets elsewhere in the world, have emerged from COVID with their finances intact and poised to transition into easing cycles that will foster growth.
- India, Japan and China, Asia’s power houses, offer considerable investment opportunities in their own ways—both near and long term.
- Markets are interconnected. While individual markets can offer their own particular strengths, like India and Japan, getting exposure to good companies across Asia and emerging markets, in our view, is the way to leverage the economic momentum of these regions.
As San Francisco, home to Matthews’ U.S. headquarters, closes hosting the Asia-Pacific Economic Cooperation (APEC) meetings this year, it’s worth reflecting on the role Asia plays in the global economy, in emerging markets and in our portfolios. In short, Asia matters. It remains the growth engine of the world. It’s an important part of global supply chains. Asia has innovation and growing consumption and it is increasingly important as a trade area itself. Above all, Asia matters because it continues to grow and is projected to grow faster than any other region in the coming years.
From a portfolio standpoint, Asia is also a diversifier. It offers diversification from other regions such as the U.S. and it offers differentiation across different markets within itself. Asia is also becoming more institutionalized. It has a growing domestic investment culture; it has more Asian investors and more domestic pensions funds, sovereign wealth funds and mutual funds.
This all said, these have not been easy times for investors. Within Asia’s constituent parts, China’s economy has faced challenges and its equity markets have not performed well. And when China slows others slow, like Thailand which depends on China for tourism and trade. Indonesia and Australia, big exporters of commodities to China, have also felt the pain. At the macro level, the Federal Reserve’s interest rate strategy and the strong U.S. dollar have also been a headwind for Asia and emerging markets generally. At the same time, we have also seen some good individual equity market performances. India and Indonesia—the latter in spite of its significant commodity exports to China—have both done well. Elsewhere, parts of South Korea and Taiwan have performed, particularly in the technology sector.
“When the Fed finally pauses from its ‘higher-for-longer’ strategy and Asia markets also loosen, this should provide a growth tailwind,” Chief Investment Officer Designate Sean Taylor.