“You don’t have enough money in Asia, and you ought to have more.” That was the main message from Matthew Dobbs, a fund manager at Schroders and an expert in Asian investments. Dobbs was speaking at the sixth annual Morningstar Investment Conference, where he outlined his current views on Asian investment strategies.
The fund manager conceded that high growth in Asian economies does not guarantee high growth in your investments, making it tricky to devise an effective investment strategy.
“That high growth rate doesn’t necessarily come back in returns,” he said.
Therefore, investors must be targeted in the way they invest in Asia. There are some quality sectors and countries, but there are other areas that are value traps. For example, while Dobbs likes China over the long term, he believes that investing in China right now is not a good strategy in the short term. In particular, he is cautious about banks in China, saying he believes that Chinese banks are beginning to look a lot like the Royal Bank of Scotland. These companies are cheap “but they’re cheap for a reason,” he said. Since 34% of the overall Chinese market is dominated by financials and banks, it would be risky to be bullish about China as a whole right now, he explained.
Meanwhile, other areas in Asia and other sectors are far more attractive. In particular, Dobbs says he likes well-run, large manufacturers who continue to gain market share as smaller companies fall to the wayside. He also likes prospects for Indonesia, Hong Kong and the Philippines.
Dobbs runs the Silver-rated Schroder Asian Alpha Plus fund, which invests in large, mid and small-cap companies in Asia. He also manages a number of other Asia-focused Schroders funds.
