If the growth environment improves, and QE tapers without incident, Asian markets could find an inflection point in 2014, says Andrew Swan.
‘With better growth as we move into a post-QE environment, and credible reform in China, the outlook is improving for equities and 2014 could mark a bottom of markets for Asia,’ he said.
However Asia is unlikely to perform as a homogeneous region, said Swan, who believes Southeast Asia still has room to correct.
‘I think there’s more to go, because earnings forecasts have only been cut by 20%, and I think we’ll see more downgrades in the market. Valuations always matter and in Southeast Asia, they’ve gone up for the past three years. At some point, valuations will make sense again.’
However, he noted a silver lining in certain Asian markets where QE tapering has caused some volatility, including India and Indonesia.
‘What is encouraging is that they are grappling with the problem rather than being held hostage by other central bank policies,’ he said.
The fund, says Swan, is a concentrated mid cap-biased fund, which focuses on structural growth themes such as gaming, tourism, and internet stocks. ‘We’re trying to move into what’s going to work in the next 10 years in Asia,’ said Swan.
One theme Swan cites is smartphone usage in China, which he believes could grow further. ‘There are opportunities in the Chinese mobile sector. Smartphone penetration in Asia is about 400 million phones, and by 2015 it’s projected to reach around 1.5 billion smartphones, compared to 600 million in the rest of the world.’
Since the start of 2013 to end-November 2013, the fund has returned 25.14% against the benchmark MSCI AC Asia ex Japan TR USD return of 4.48% in USD terms.