Don’t Navigate on Headline News When Investing in Asia-Pacific (Robeco)

Robeco’s Thu Ha Chow, Head of Fixed Income Asia, and Joshua Crabb, Head of Asia-Pacific Equities, discuss their approach to the region (Don’t navigate on headline news when investing in Asia-Pacific (Robeco) 26:40 Min Podcast w/ Transcript).

Key takeaways:

But even if you think that supply chains are going to get broken, et cetera, that is going to be a boom. If there’s less in China, there’s going to be more in Indonesia, there’s going to be more in Vietnam.

…we’ve had a lot of risk within SVB in the US and then Credit Suisse here in Europe, is just a reminder, actually, there is risk in all markets. And as Josh mentioned, the risk within Asia is actually much more honed in, and we talk a lot more about those and we should have been talking about these other risks elsewhere. So I think that’s a positive, that the risks are well flagged and people know what they are navigating them.

If you go and start a factory in China today, you basically build a factory, try and get some staff from your nearest competitor at a higher price and you operate. When you go and build one in Indonesia or Vietnam, you’re literally going into probably an urban area that needs to be cleared, roads need to be built, a power station needs to be built, housing needs to be put in. Then you go and hire someone who’s probably been working in the informal economy. They get a job with a regular paycheck. They can then take that to the bank, They can borrow money. So the multiplier effects in these economies are very, very dramatic. Keep in mind, 1 in 2 people in Indonesia do not have a bank account.

…when we consider the nature or the uncertainty around things like geopolitics, I think that’s [index investing approach] a risky way of doing things, because what’s large now may not be as large in the future. I was looking at one of the countries in the region literally just then and looking at who the richest top ten were and how much that has changed over the last 20 years, and the industries they’re involved in. So I do think that is quite dangerous.

And that volatility provides good opportunities for entering into that. And you have to be bottom up. You have to kind of do the homework. It’s just not a one size fits all.

… this is a profit opportunity because the last time we saw valuations this low and the last time we saw a valuation gap this large, when things did bottom up and start to improve, Asia outperformed by over 100%. So you have to think things are a lot different this time around or want to give up on those sort of opportunities. So, as rate hikes come to an end, as stimulus comes through, there’s still a lot of lot of the production around the world, a lot of that stimulus money will find its way here at very, very cheap valuations. Don’t get too tied up around geopolitics. These things tend, as we all hope, not to get as bad as what people think. But even if they do stay in this sort of stalemate situation, there is the 681 million people in Asia, and I told you about this, the world’s largest population in India. That’s all part of Asia as well. Don’t miss out on this opportunity. And geopolitics can improve. It is possible.

Don’t Navigate on Headline News When Investing in Asia-Pacific (Robeco)

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