Decades ago, a similar economic shift occured when Japan’s technology was passed to Hong Kong, Singapore, South Korea and Taiwan, which were at the time called the Asian Tiger economies, wrote portfolio manager of Asia ex-Japan equities, Wilfred Son, and portfolio manager of Asia ex-Japan small cap equities, Elizabeth Soon, in a recent report.
They see parallels with what has been occuring today in China and India. These two countries are advancing into higher end manufacturing and homegrown innovative technologies, supported by the ASEAN nations.
Pinebridge cites “more demanding markets, greater wealth, better education and social welfare, and supportive government policies for innovation and entrepreneurship” as the reasons China and India have moved up the value chain.
Meanwhile, the changing landscape of the two countries, for instance, their rapid development of value-added industries, technology deployment as well as the shedding of labor-intensive industries to nearby countries, will provide both challenges and opportunities in 2016 and beyond, they noted.
This year, the asset manager favours companies in the automation, media and non-residential construction sectors in Asia, and, more specifically, in China's consumer and services companies.
“Broad-brush investment style choices such as size, growth, value and momentum are unlikely to be rewarded in 2016 due to continued market volatility,” the report said.
But instead, “investors can use the volatility caused by macroeconomic factors to look for durable and high-quality companies within new economy and consumer sectors.”
Son manages the Pinebridge Asia ex Japan Equity Fund and Pinebridge Asia Balanced Fund. The former beat its benchmark MSCI Asia ex Japan Index by 3.7 percentage points on a three-year basis, according to FE data.