Schroders Investment Director Chloe Shea: What are the Investment Themes to Watch in Asia’s Economic Recovery?
May 2023 – This is an expert commentary on investment themes in Asia – What are the Investment Themes to Watch in Asia’s Economic Recovery? by Chloe Shea who is the Investment Director, Multi-Asset at Schroders.
Founded in 1804, Schroders is one of Europe’s largest independent investment management firms by assets under management. As at 30 June 2022, assets under management were £773.4 billion (€898.4 billion; US$939.2 billion). Schroders has continued to deliver strong financial results. It has a market capitalisation of circa £7.7 billion and employs over 5,800 people across 38 locations. Schroders offers innovative products and solutions across their five business areas of solutions; institutional; mutual funds; private assets & alternatives; and wealth management. Clients include insurance companies, pension schemes, sovereign wealth funds, endowments and foundations. They also manage assets for end clients as part of their relationships with distributors, financial advisers and online platforms.
What are the Investment Themes to Watch in Asia’s Economic Recovery?
Chloe Shea: Asia is a diverse region which consists of developed and emerging markets, and contributes to over one-third of the world’s GDP that we simply cannot ignore. In Schroders’ earlier economic forecast, we looked at what the reopening of the Asia Pacific and Chinese economies would imply for the world. In a recent article, we discussed the 3 factors that we see steering the Asia Pacific investment markets. But to uncover the best opportunities, selectivity in terms of market and sectors will be key.
Zooming in to the Asia investment universe, our analysis found that four areas are well placed to benefit from the Asian reopening and growth story. These opportunities, covering both the growth and income space, include:
- Asian consumption: Apart from the themes of China’s re-opening and self-reliant economy, import substitution, and common prosperity in play, we are also seeing a release in pent-up consumer demand, which is supported by strong labour markets and healthy household savings. Consumer spending is gradually shifting from goods to services. Meanwhile, the travel and leisure industries continue to recover, which should provide more legs for the consumer sector in Asia.
- Technology supply chain: Structural growth trends such as 5G and electric vehicles (EVs), as well as the brewing metaverse concept will likely continue to drive technological innovation. Investors tapping into these trends at their early stages of development may find it rewarding if these companies can hold up and thrive in the long run.
- Utilities: By nature, cashflows for utility companies tend to be more predictable. These characteristics lead us to believe that this sector can provide investors with a steady dividend stream. Some utilities companies are renewable energy companies which should benefit from long term net-zero goals.
- REITs: REITs (or Real Estate Investment Trusts) in Asia generally offer a decent yield of 5-6%. By taking a selective approach, we now prefer retail REITs that are also able to benefit from China’s re-opening.
” Asian consumption, Technology supply chain, Utilities, REITs “
What else can investors consider from the sustainable investment spectrum?
Chloe Shea: From a longer-term perspective, finding investments that are sustainable in nature will be key to riding on the potential waves of growth in the years to come. Part of this process will be taking a thematic approach when analysing different sectors.
We identified 2 sustainable themes that are supported by structural trends, which look set to benefit should the movement of interest rates stabilises:
1. Healthcare innovation
- According to the Asia-Pacific Report on Population 2022 published by UN Economic and Social Commission for Asia and the Pacific, the fastest growing age group in Asia is those aged over 65 years old. Yet, health budgets in this region are at breaking points just like anywhere else in the world.
- Expanding demographic demand, combined with pressured budgets controlling costs and innovation, create the force for change underpinning multi-year structural growth opportunities.
- In fact, investment in this theme ties in directly to the UN Sustainable Development Goal 3 – Good health and well-being. Investors can gain exposure to this theme by looking at its value chain and identifying selected companies from sub-themes, such as advanced therapies, medical technology, healthcare services (managing healthcare and telehealth), digital healthcare and wellbeing. Covid-19 has demonstrated the power of innovative treatments and accelerated new healthcare models.
2. Digital transformation
- Even though digital-related stocks have experienced significant drawdowns in recent market slumps, we do believe that digital transformation is a theme that is of structural demand in the long run.
- In our view, we are transiting to a new innovation cycle – from a fifth wave of digital networks, software, new media, mobile phones and the Internet, to a sixth wave of clean tech, AI (artificial intelligence), IoT (Internet of Things), gene therapy, automation and robotics, and digital finance. Although cyclical, the semiconductor industry is also showing structural growth, and demand is spilling in from non-traditional customers. Smarter services and devices will connect more people to mainstream business activities and resources.
- We are watching how disruptive innovation will create opportunities for investors to capture capital growth beyond the near-term horizon.
This is an expert commentary on investment themes in Asia economic recovery by Chloe Seah who is the Investment Director, Multi-Asset at Schroders.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect nor is it to be construed as any solicitation and offering to buy or sell any investment products. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Any security(ies) mentioned above is for illustrative purpose only, not a recommendation to invest or divest. Opinions stated are valid as of the date of this document and are subject to change without notice. Information herein and information from third party are believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. You may not get back the full amount invested. Derivatives carry a high degree of risk. Exchange rate changes may cause the value of the overseas investments to rise or fall. If investment returns are not denominated in HKD/USD, US/HK dollar-based investors are exposed to exchange rate fluctuations. Please refer to the relevant offering document including the risk factors for further details.
This material has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited. Schroder Investment Management (Hong Kong) Limited Level 33, Two Pacific Place, 88 Queensway, Hong Kong www.schroders.com.hk
Founded in 1804, Schroders is one of Europe’s largest independent investment management firms by assets under management. As at 30 June 2022, assets under management were £773.4 billion (€898.4 billion; US$939.2 billion). Schroders has continued to deliver strong financial results. It has a market capitalisation of circa £7.7 billion and employs over 5,800 people across 38 locations. Schroders offers innovative products and solutions across their five business areas of solutions; institutional; mutual funds; private assets & alternatives; and wealth management. Clients include insurance companies, pension schemes, sovereign wealth funds, endowments and foundations. They also manage assets for end clients as part of their relationships with distributors, financial advisers and online platforms.. Visit: www.schroders.com.hk
Sign Up / Register
- Manage $20 million to $3 billion of assets
- Invest $3 million to $300 million
- Advise institutions, billionaires, UHNWs & HNWs
Caproasia Platforms | 10,000 Investors & Advisors
- Caproasia Access
- Caproasia Events
- The Financial Centre | Find Services
- Family Office Circle
- Professional Investor Circle
- Investor Relations Network
Monthly Roundtable & Networking
Family Office Programs
The 2023 Investment Day
- 28th March 2023 - Hong Kong
- 4th April 2023 - Singapore
- April 2023 - Virtual
- 6th June 2023 - Hong Kong
- 13th June 2023 - Singapore
- Sept 2023 - Hong Kong
- Oct 2023 - Singapore
- Oct 2023 - Hong Kong
- Visit: The Investment Day | Register: Click here
- The Investment Summit
- The Private Wealth Summit
- The Family Office Summit
- The CEO & Entrepreneur Summit
- The Capital Markets Summit
- The ESG / Sustainable Investment Summit