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The US banking crisis, high inflation and interest rate hikes have impacted global equity markets. However, Asia ex-Japan has largely been shielded when compared with the US and Europe. Asian equities have risen in the first four months of 2023 but have been underperformers when compared to broader global markets.
Asian economies have already started pausing rate hikes, and inflation is falling in some countries. Additionally, the China reopening has provided broader Asian markets to pick up pace.
The MSCI AC Asia ex Japan Index, which tracks two developed markets (except Japan) and eight emerging markets in Asia, has risen 2.23% YTD as of April 28, whereas the MSCI AC World Index is up 9.04% during the same period.
Investment experts are bullish on the Asia growth story, and the IMF recently upgraded its economic outlook for the region. Meanwhile, China seems likely to achieve its 5% GDP target for 2023 after reporting strong numbers in the first quarter. The country’s return to consumption growth is of major interest to market participants.
With improving fundamentals and a positive long-term outlook, here are some funds for investors exploring the Asia ex Japan equity sphere.
Nikko AM Asia ex Japan Fund
Launched in early 2016, the Nikko AM Asia ex-Japan fund invests in equity markets of as Taiwan, China, Hong Kong, Singapore, Malaysia, Thailand, Indonesia and the Philippines. The fund is benchmarked against the MSCI AC Asia ex Japan Total Return Net Index.
As of March 2023, the fund had assets under management of $36.5m. The fund is managed by Peter Monson and Eric Khaw, who collectively have more than 25 years of investment experience. The Nikko Asset Management fund has ongoing charges of 0.95% and a minimum investment of $1 m.
In the past six months, the fund has given 15.09% returns to investors, compared to the 16.19% rise seen in the benchmark index.*
The top five holdings of the fund are — TSMC (7.61%), Aia Group (5.67%), Samsung Electronics (5.20%), Reliance Industries (4.16%), and Tencent Holdings (3.55%).*
Sector-wise, the fund is largely invested in IT, followed by financials, healthcare, consumer discretionary and communication services, among others. Around half of the fund’s allocation is for China.
Invesco Asian Equity Fund
The Invesco Asian Equity Fund is the oldest and largest on our list, launched in 1993 and with assets under management of $2.24 bn. The fund is actively managed and invests primarily in shares of companies listed in Asia (barring Japan), Australia and New Zealand. The fund has a minimum investment of $1,500, an entry charge of up to 5% and an annual management charge of 1.50%.
The Asia Equity Fund is managed by William Lam and Ian Hargreaves, who both have over 20 years of investment experience.
The fund has given returns year-to-date returns of 5.51% as of March 31, whereas the benchmark MSCI AC Asia ex Japan Index (Net Total Return) has risen 4.34%.
The top five holdings of the Invesco fund are — TSMC (7.1%), Samsung Electronics (6.3%), Tencent (6.2%), Alibaba (4.3%) and HDFC (3.7%).**
Sector-wise the fund is invested the most in financials (22.6%), followed by IT (20.5%), consumer discretionary (18%), communication services (10.6%), and industrials (6.2%).**
The highest allocation is for China (36.8%), followed by South Korea (15.6%), Taiwan (13.3%), India (12.2%) and Hong Kong (6.6%).**
Baillie Gifford Worldwide Asia ex Japan Fund
Launched in 2020, the Baillie Gifford Worldwide Asia ex Japan Fund is quite new. The fund has assets under management of $48.1m and is benchmarked against the MSCI AC Asia ex Japan index.
Managed by Roderick Snell and Ben Durrant, who collectively have over 25 years of investment expertise, the fund has ongoing charges of 1.65% and an initial charge of 5%.
Since its inception, the fund has given 8.2% returns, whereas the benchmark index has risen 1.2%. Year-to-date, as of April 30, the fund has given 3.2% returns against the 2.2% rise of the benchmark index.
The top five holdings of the fund are — TSMC (4.6%), Reliance Industries (4.1%), Ping An Insurance (3.5%), Samsung SDI (3%), and CNOOC (3%). Sector-wise, the fund is largely invested in financials (20.5%), followed by IT (18.3%), consumer discretionary (15.4%), materials (13.7%), and industrials (9.2%).***
The highest allocation is for China (36.7%), India (18.3%), South Korea (11.5%), Indonesia (10.1%), and Taiwan (9.2%), among others.***
Editor’s Note – All fund data for Share Class A. Other share classes might be available.
*as of March 30, 2023
**as of March 31, 2023
***as of April 30, 2023
