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A weakening global economic outlook owing to rising inflation and a hawkish US Federal Reserve has left investors in a lurch. However, while financial markets around the world are consolidating, ASEAN equity is showing resilience.
Southeast Asian economies are reopening bringing in tourism, as seen in Thailand. The region is not as export heavy as other global economies, limiting the impact of slowing global demand, whereas easing commodity prices have improved the growth outlook for Southeast Asian economies.
The MSCI ASEAN Index, which covers large- and mid-cap companies across four emerging markets, one developed market and one frontier market, has risen 2% in the month of August. Meanwhile, The MSCI World Index, which follows large- and mid-cap firms across 23 developed markets, fell 4.14% in August.
“The China+1 supply chain strategy is now a given, and ASEAN is well positioned to play a significant role. A gradual reopening post-COVID has ensured that growth has not been throttled, and this has paved the way for foreign investments,” said Nikko AM in a blog.
Investors looking to invest in ASEAN’s growth story can consider the following funds.
JPMorgan ASEAN Equity Fund
Launched in 2009, the JPMorgan ASEAN Equity Fund (ISIN: LU1839390173) invests in companies based in countries that are members of the Association of Southeast Asian Nations (ASEAN) with a long-term capital growth outlook. The fund is pegged against the MSCI AC ASEAN 10/40 Index, which tracks large and mid-caps across four emerging and one developed market countries.
JPMorgan ASEAN Equity Fund is managed by portfolio managers Pauline Ng, Changqi Ong, Desmond Loh and Stacey Neo, all of whom have more than 10 years of experience dealing in financial markets. The total fund size as of September 13, 2022, was $1.39 bn.
The fund has given annualised returns of 6.4% since its launch, whereas giving negative annualised returns of 2.2% in the past three years. Over the past five years, the fund has given annualised returns of 0.8%.
Among the different countries in ASEAN, the fund has the highest allocation to Singapore (33.7%), followed by Indonesia (22.6%), Thailand (20.9%) and Malaysia (12.5%). The fund is largely invested in the financial sector (44.6%), followed by communication services (11.6%) and Industrial (9.1%). **
The high sector weightage in financials reflects in the fund’s top holdings, which include DBS (8%), Bank of Central Asia (7.4%), Oversea-Chinese Banking (5.1%) and internet company Sea (4.6%).**
The JPMorgan fund has an initial charge of 5% of net asset value, with an annual management fee of 1.5%.
Fidelity Funds – ASEAN Fund
The oldest fund on our list, Fidelity Funds – ASEAN Fund (ISIN: LU0261945553) was incorporated in 1990 and currently manages $1.03 bn worth of assets*. Domiciled in Luxembourg, the fund is managed by Madeleine Kuang, who has 15 years of market research experience.
Fidelity’s ASEAN Fund is pegged against the MSCI AC ASEAN Index. Since its launch, the fund has given annualised returns of 5.7%. In the past three years it gave negative annualised returns of 0.2%.
The fund is 94.5% invested in equities, with the largest exposure to the financial sector (35.7%), followed by consumer staples (11.6%), communication services (7.6%) and industrials (6.7%). Region-wise, Fidelity’s ASEAN Fund is largely invested in Singapore (29.9%), followed by Indonesia (25%) and Thailand (16.3%).*
Its top investments include DBS Group (7.6%), Bank Central Asia (5.7%), United Overseas Bank (4.6%), and Sea (4.3%), among others.*
The Fidelity fund has an initial charge of 5.25% of net asset value, and an annual charge of 1.94%.
Barings ASEAN Frontiers Fund
Incepted in 2012, Baring ASEAN Frontiers Fund looks to achieve long-term capital appreciation by investing in companies in Asia that will benefit from economic growth and development in the region. The fund targets investing at 70% of assets in equity or equity-related securities in ASEAN countries, with the flexibility of investing in Asia frontiers equities.
With a total size of $436.20 m as of August 31, 2022, the fund is pegged against the MSCI AC ASEAN Index. It is managed by portfolio managers SooHai Lim, who has 24 years of experience, and Tiebin Liu, who has 12 years of financial market experience.
On an annualised basis, Barings ASEAN Frontiers Fund has given negative returns of 17.46% in 2022. The year 2021 too was bad for the fund, giving annualised negative returns of 13.16%. Since its inception, the fund has given annualised returns of 6.28%.**
Barings ASEAN Frontiers Fund is heavily invested in financials (35%), followed by industrials (13%), communication services (10.5%) and consumer staples (9.1%). Country-wise, the fund is invested in Singapore (28.5%), Indonesia (23.5%), Thailand (22.7%) and Malaysia (12.7%).**
The fund’s top holdings include DBS (9.03%), PT Bank Central Asia (7.44%), Sea (5.93%), Oversea-Chinese Banking Corporation (5.37%) and Pt Bank Rakyat Indonesia (4.99%).**
Barings charges an annual management fee of 1.25% for investing in the fund.
* as of 31/08/2022
** as of 31/07/2022
