Staying the Course: Matthews Pacific Tiger
Our portfolio managers field some tough questions on Pacific Tiger’s performance, its positioning and what they believe are its unique strengths for investors.
Sean Taylor, Chief Investment Officer (CIO) designate
To begin with, it’s worth reflecting on the role Asia plays in the global economy and in our portfolios. It is the growth engine of the world. It is a massive supply chain area with innovation and consumer markets and it is increasingly important as a trade area itself. Above all, Asia continues to grow and its emerging markets are projected to grow faster than any other region in the coming years.
The last five years, particularly the last year, have been challenging. COVID and the different speeds that economies recovered stability has led to different cycles. In Asia, the private sector has taken the brunt of the pain, with job losses and a slowdown in activity absent the government support we saw in the U.S. and Europe. At the macro level, the Federal Reserve’s interest rate hikes and the strong U.S. dollar have also been headwinds. Within Asia, the Chinese economy has faced the biggest challenges, enduring regulatory interventions, a deep property slump, financing concerns and a slower than expected recovery from COVID. And when China slows, others slow. Thailand, for example, depends on China for tourism and trade while Indonesia and Australia are big exporters of commodities to China.
“Asia has a lot to play for, in our view. It has markets which are industrializing and creating capital and there are places like India that are digitalizing on a rapid scale,” Sean Taylor, Chief Investment Officer (CIO) designate.
In spite of these challenges we’ve seen robust growth and good returns in some Asian markets. India has done incredibly well this year. Elsewhere, parts of South Korea and Taiwan have performed strongly; in the case of South Korea, from its rapid expansion in the global electric-vehicle (EV) battery ecosystem; in the case of Taiwan, from its embedded role in hardware supply chains and growing positioning in the nascent artificial intelligence (AI) boom.
We believe Asia has a lot to play for. It has markets which are industrializing and creating capital like Vietnam and Indonesia and it has places like India that are moving from consumer staples to consumer discretionary and are digitalizing on a rapid scale. Asia has markets with high growth and markets like South Korea and Japan with low growth that play crucial roles in global technology supply chains. And when China’s growth picks up that will not only be good for China it should have a cascading effect across its Asian trading partners.