In terms of geopolitics, elevated tensions between China and the West, particularly the US, are likely to continue, but we do not expect to see escalations to the point of military conflict in Taiwan. While some market participants are now expecting a rebound in the Chinese economy, we are not as optimistic, instead believing that its economy is on a downwards trajectory over the longer term.
In stark contrast, we are particularly positive about the outlook for Australia; on a country level it is the largest weighting in our Asian Income strategy. We expect Australia to outperform many of its developed market peers over the longer term. It is a fully functioning democracy, it has a productive workforce, and it is home to many successful companies with significant market shares and solid barriers to entry, with very few state-owned enterprises. Corporate governance is particularly strong, and we believe Australia faces far fewer longer-term environmental risks than many other countries do in the region, and globally.
Elsewhere, we really like Singapore, which is home to many attractive businesses with revenues from across Southeast Asia. In addition, its flexible immigration policy and stable economy mean we are seeing notable numbers of wealthy Chinese residents deciding to relocate there, a trend we expect to continue, and which should benefit Singapore.
Outside of more developed Asia, we also have exposure to India, which offers strong growth opportunities, including financial inclusion. We recently opened a position in an Indian private sector bank, which we believe should benefit from this trend. In the next decade, India is expected to contribute about 20% of total global growth (source: Morgan Stanley).
We were pleased with the resilience of the companies held in our strategy in 2022, and, while we cannot be certain what 2023 will bring, we continue to believe we are well positioned as we move into the new year. Many of the companies we invest in are already considered global leaders in their respective sectors, and we think the characteristics of the companies held in our strategy mean they should be able to withstand a recession, or even come out the other side stronger than their competitors.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.