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What’s hot in Asia ex-Japan

What’s hot in Asia ex-Japan

This year Manulife Asset Management (AM) will be looking into China’s healthcare, banking, insurance and consumer discretionary sectors for investment. 

That’s according to Citywire + rated manager Ronald Chan, who is the Asia ex-Japan equities chief investment officer at the company.

‘The healthcare sector has been under-priced in China.

‘What you tend to see is that the economy is starting to broaden out. That means other sectors are going to benefit - for example, banks, insurance and consumer discretionary,’ Chan told Citywire Asia.

According to the executive, banks are favourable because the non-performing loan risk is now subsiding; metal prices have been going up; risks at state-owned enterprises are less of a concern, and valuation is trading at substantial discount-to-book.

The trades Manulife AM was executing during the last quarter, for instance, were partly coming from the information technology businesses. However, going forward the asset manager will invest more in old economy companies such as banks and insurers.

Chan said global growth has been synchronised. Most of the major nations have been expanding their Purchasing Managers’ Index figures and earnings’ growth in 2017 was very strong.

On top of that, policies from China have been encouraging domestic consumption, including the property and auto sales sectors. Moreover, valuation in Asia is still relatively cheap compared to different regions.

‘If you look at valuation, Asia is trading at 13x, same time last year it was trading at 11x, so that has been some uplift in valuation. But if you compare that to developed market, especially in the US, US is trading at 19x,’ he said

‘Most international investors are still underweight Asia. The underweight is narrow, but still underweight. So the marginal buyers are still coming in to this part of the world.’

What’s more, last year there was an increase in domestic liquidity across several Asian markets including Hong Kong, Taiwan, Korea and India – and governments from these markets were in fact encouraging investment.

Chan said this trend is set to continue, contributing to strong growth momentum.

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