Aberdeen's Young: Even I Get Scared in Volatile Markets

Aberdeen Standard's Hugh Young says concerns about a trade war are justified, but investors should stay the course or they risk missing the recovery

Emma Wall 2 October, 2018 | 12:26AM

 

 

Emma Wall: Hello and welcome to the Morningstar Series "Why Should I Invest With You?" I'm Emma Wall and I am joined today by Aberdeen Standard's Head of Asia Pacific Hugh Young.

Hello Hugh.

Hugh Young: Hi good morning.

Wall: So, it's fair to say I think that sentiment towards Asian equities this year has not been great, there have been quite significant outflows but there have also been quite significant headlines. How much of fear do you think is warranted?

Young: I think a fair bit of the fear is warranted. So, concerns primarily over trade wars are absolutely justified and we're seeing the economy in this part of the world slow as a result. That's bringing down earnings for certain sectors, I mean not everywhere. And of course, at the same time as markets fall, one becomes more and more excited about value on offer as and when it arises. But certainly, there is reason behind the falls. We've had currency wobbles, fears over economic growth levels and the rest. And we've seen some dramatic falls after some dramatic rises in some of the sectors. So, the IT sectors, the internet and so on. We've seen dramatic pull backs in certain parts of Asia.

Wall: I mean it's easy for you as a professional investor to say that these drops create opportunities. Because you are seasoned. You've been doing this for a while. But for the retail investor, quite often the psychology of those significant falls makes it very difficult to stay the course let alone put more money in. So, what is the messaging that we should be giving to retail investors in a volatile market such as this?

Young: It is hard and I totally understand why people of course see sharp falls and "oh, my goodness, I don't want to go there" and of course you look back on that and say, if only I had started to nibble. So, in many ways that's why – for me I am very comfortable with things such as savings, we just put money in and even I get scared in these markets. So, I understand that. But then you look back and use your experience and if you did your homework either as an investor on funds for example to invest in and the characteristics of funds and don’t bet the bank on them. And I think that's the way to do it. But it's not easy when people get scared of this. The old adage of market's being driven by fear and greed is absolutely correct.

Wall: And looking then at those opportunities, are there any particular sectors that you are seeing at the moment which you think are particularly compelling?

Young: Well, we're seeing some value arise across markets particularly we're seeing some quite sharp falls in some of the smaller cap stocks within the region. So as a general sector, if you call that a sector that’s appealing. Some of the IT technology stocks have pulled back sharply as well. Some of the more stable steady eddies who have actually held up quite well in this environment. So, your consumer stocks and the like which didn’t perform very well in the previous years, have held up well. So, for us it's more a matter of looking at the things that have pulled back sharply and where we are comfortable the fundamental business is still strong, we are gently topping up.

Wall: And what then about countries. Because I know over the years your lover affair with China has been on and off. I was researching before this interview. We spoke in 2011 and you said that you were avoiding China at that time. At the moment with it hitting the headlines so significantly trade war rhetoric, slowing economy. What is your feeling on China at the moment?

Young: To put it in context we've always been keen on China in a broad sense. It's a massive economy, bits of are growing very fast. And there are some exciting developments. And our reservations were largely to do with individual companies, whether we had sufficient comfort with them, some of the accounting issues and so on. And over the years of course as we see more and more how these companies act, we get more and more comfortable. So we are hoping to steadily put more money into China on a selective few, but there are still lots of reason to worry about China. Parts of China will be amongst the worst hit by what looks quite a nasty trade war as we speak today. So, for us I think it's again a matter of being careful with stocks we buy within China. So, we are using this as an opportunity to add to China.

Wall: Hugh, thank you very much.

Young: Thank you.

Wall: This is Emma Wall from Morningstar. Thank you for watching.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Aberdeen Asia Pacific Equity I274.39 GBP-0.94
Aberdeen Asian Smaller Ord1,010.00 GBX0.50

About Author

Emma Wall

Emma Wall  is Senior International Editor for Morningstar