Strong domestic demand in India, Indonesia and China is driving growth in consumer-facing market sectors, according to Baring Asset Management.
Barings head of Asian equities, Hyung Jin Lee, said that the region offers very good value to investors and that it has been overlooked by the strength of the US recovery in the past two years. As well as a resurgence in domestic consumer markets, Hyung Jin Lee said that increasing political stability and a more balanced economic growth model in China were positive factors. He added: “Currently our highest overweight markets are Indonesia and India. We like south Asian markets because they offer a very strong growth outlook in the holdings that we have in these countries. Both India and Indonesia are benefiting from new leadership and ‘economically favourable’ reform policies.”
Lee said that technology is a strong theme in Asian portfolios, with South Korea and Taiwan benefiting from political stability and their strengths in technology. “The fact that China’s e-commerce penetration rate as a percentage of sales is forecast to be higher than the US by the end of 2015 is just one example of the importance of technology to the Asian investment narrative. Asian companies that are benefiting from the on-going rise in smart phone usage and the mobile internet industry,” Lee said.
However, asset manager Legg Mason said that investors are planning to cut their emerging market exposure in 2015, following a poor second half to 2014, particularly in Brazil and Russia. Adam Gent, head of UK sales at Legg Mason Global Asset Management, commented: “The falling oil price, a strengthening dollar and the increasing likelihood of a continued slowdown in China are all weighing on sentiment and causing investors to reassess their current position.”