With a gloomy growth picture in the west, is it time to look east to boost growth potential?

By Joseph Hill, Senior Investment Analyst, Hargreaves Lansdown:
2022 was a difficult year for many Asian markets with a combination of slowing growth, rising interest rates and a strong US dollar posing challenges. But with the IMF forecasting growth of 4.6% for the region in 2023, compared to global growth of 2.8%, the prospects look brighter.

While Asian markets are often lumped together, they can behave quite differently. Some countries in the region are rich in commodities and natural resources, some rely on exporting goods to Western economies, and others have vibrant local consumer-driven growth.

While the region’s export focused economies continue to face headwinds from sluggish global growth, economies across Asia are set to benefit from the China re-opening effect. This follows a prolonged period of depressed economic activity. The rebound should be most evident in service consumption and tourism as consumers make up for lost time.

Pinpointing the inflection point in global rates is near impossible, but its highly likely we’ve already seen the bulk of rate rises in this cycle. Reaching the peak or even seeing interest rates start to fall later this year could provide a tailwind to equity prices by taking pressure off local Asian policy rates, bond yields and currencies.

There are growth opportunities aplenty in Asia but there can be a wider divergence of standards in areas like corporate governance. This can expose investors to a higher risk of nasty surprises, especially in uncertain and volatile times. That’s why we think it’s arguably more important when investing here than in other regions, to leave it to the experts and invest with an experienced active fund manager.

Asia fund ideas for a growth focused portfolio
Schroder Asian Alpha Plus
This fund aims to provide growth by investing in larger companies across Asia, based in countries such as Hong Kong, India, and Taiwan. Manager Richard Sennitt aims to spot Asian companies with exciting potential before they’re noticed by other investors, making use of the in-depth analysis conducted by well-resourced investment team at Schroders.

Sennitt looks for companies with healthy cash flows, strong franchises, a quality management team, superior corporate governance standards and a strong business model that’s able to defend against competition.

This fund can offer more adventurous exposure to Asian markets in the pursuit of long term growth and have high conviction in the experienced Sennitt to do a great job for investors over the long term.

FSSA Asia Focus
This fund aims to grow an investment over the long-term by investing in countries across Asia, from China and India to Singapore and Hong Kong. Manager Martin Lau looks to invest in companies with a competitive advantage that others struggle to replicate, such as a well-known brand or the ability to raise prices for their products without affecting demand from customers.

These businesses should have the potential to grow earnings sustainably over the long run and be run by reputable management teams that don’t take unnecessary risks in the pursuit of short-term gains.

Lau has a strong track record, and is conservative in the way he manages the fund, aiming to limit losses in falling markets. This fund is run by a manager and team with a great pedigree of investing in Asia.

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