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Two themes driving UBS’ Apac ex-Japan equities

Two themes driving UBS’ Apac ex-Japan equities

Holdings in China’s IT and consumer discretionary stocks drove the performance of UBS Asset Management’s top performing Asia Pacific ex-Japan equity funds last year, according to Citywire AAA-rated portfolio manager Shou-Pin Choo.

Choo manages the UBS (CH) Equity fund – Asia (USD) P and UBS (Lux) KSS-Asian Equities (USD) P- acc fund, which returned 39.8% over the past three years, as compared with 27.91% from the average manager in its sector.

The top contributing stocks for the fund’s performance from last year to March this year included the holdings in Tencent, TAL Education, Jiangsu Hengrui, Ping An Insurance, and Kweichow Moutai.

However, Choo told Citywire Asia the stock selection of the funds is primarily bottom up and asset allocation decision is driven mainly by the availability of attractive investment options from its fundamental research work.

Changes in investment outlook of a company relative to the stock price would drive changes to its holdings in those funds, he added.  

Choo said several mid to long term trends in the region will bode well for Asia ex-Japan equities. First is the favourable demographics in several Asian countries, particularly India, China, Indonesia and Vietnam.

Second, the increased spending power and the shift in consumption patterns towards "premiumization" in China. Third, the need for more infrastructure spending, particularly in India and Indonesia.

Fourth, the greater dominance of selected companies that are globally competitive, such as in Korea and Taiwan. Lastly, disruptive technology and business models that have led to the development of internet and tech companies.

China

According to Deloitte Insights, China’s demographic trends will favour services and weigh on the manufacturing sector.

From the government’s perspective, China must retain its advantages in the manufacturing sector and these advantages are increasingly built on the back of first class infrastructure linked to an educated and productive workforce.

Meanwhile, just like many parts of the world, the generations born after 1990 show a much higher propensity to consumer, rather than save, due to lower aversion to credit and a greater acceptance of digital payments.

Companies targeting Chinese consumers will find that those born after 1990 are a force to be reckoned with.

The demographic changes in China also underpin the demand growth in the healthcare industry, with citizens becoming more health conscious and demanding better services.

 

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