Asia is one of the best places to be an equity income investor, in our view, with healthy dividend yields, attractive valuations and abundant economic growth.
It’s sometimes misperceived as being mostly made up of emerging market countries, but the Asia Pacific ex-Japan region where we invest includes the developed economies of Singapore, Taiwan, South Korea and Australia.
It’s likely that the US tariffs announced in April will curb global economic growth, but we think China may be the biggest loser from the Trump administration’s trade policies, and we don’t currently invest in mainland China. We remain confident that equities elsewhere in the region will continue to offer good opportunities for investors over the medium and long term.
For us, periods of market and macroeconomic uncertainty underscore the importance of following a robust investment process with a long-term investment horizon and a well-diversified portfolio.
We are stock pickers
The macroeconomic environment is a key driver of how we build our portfolio, but ultimately, we are stock pickers. We consider a myriad of information, such as political systems, geopolitics, bond yields and global economic forces to help us decide which countries and sectors we want more or less exposure to, as well as those areas we want to avoid investing in. We are high-conviction investors and not index huggers.
We do not identify as growth or value investors, instead we look for a combination of the two, which we refer to as quality income. We focus on companies with earnings and dividend drivers, strong balance sheets, proven management teams and shares that are highly liquid. Compared to the benchmark, our strategy typically has higher levels of profitability and return on equity as well as lower valuations, as measured by price-to-earnings and price-to-book multiples.
An abundance of world-class businesses in developed and developing markets that are large and liquid
Developed and emerging markets
Keeping the portfolio diversified means we have exposure to both developed and emerging markets, investing in some businesses with revenues that are highly connected to the global economy, and others that are more domestically focused. We choose to hold some cyclical stocks, as well as stocks that have very defensive business models. We hold some higher yielding, lower growth, more value-orientated stocks, as well as some lower yielding, higher growth stocks.
Ultimately, we are seeking to build a portfolio of companies that can perform through a broad range of macroeconomic conditions.
Our approach is to invest in 25-30 businesses across the region and stick with them for years rather than months. If new information makes us change our view about a company or sector, our focus on owning highly liquid stocks allows us to make changes.
Underappreciated technology
The portfolio has evolved over time and currently is focused in three areas: technology; the developed markets of Australia and Singapore; and the developing market, India.
We think the Asian technology stocks we own are underappreciated and undervalued by global investors given how critical they are to the tech supply chain. The US Magnificent Seven (Apple, Microsoft, Nvidia etc) couldn’t do what they do without these suppliers – most of them based in Taiwan.
Australia, Singapore, India
We see Australia as the most attractive developed market in the region and Singapore as a high-growth economic gateway to the region – and both also underappreciated by global investors. India is the most attractive developing market in the region and possibly in the world, in our view.
As noted above, we don’t own any stocks in mainland China, having sold out three years ago. We think the political system and the state of the economy make the market unattractive for investors, with the tariff war further worsening the outlook, in our view.
We have a combined 50 years' relevant experience working in Asian markets. We are focused solely on the Jupiter’s Asian equity income strategy – we manage no other strategies. We believe being experienced and being active in Asian equity markets is vital in order to access the best investment opportunities, especially the overlooked ones.
Strategy risks for Jupiter Asian Income:
- Currency (FX) Risk - The strategy can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
- Pricing Risk - Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
- Emerging Markets Risk - Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
- Market Concentration Risk (Geographical Region/Country) - Investing in a particular country or geographic region can cause the value of this investment to rise or fall more relative to investments whose focus is spread more globally in nature.
- Market Concentration Risk (Number of holdings) - The strategy holds a relatively small number of stocks and may therefore be more exposed to under-performance of a particular company or group of companies compared to a portfolio that invests in a greater number of stocks.
- Derivative Risk - the strategy may use derivatives to reduce costs and/or the overall risk of the strategy (this is also known as Efficient Portfolio Management or "EPM"). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the strategy.
- Liquidity Risk (general) - During difficult market conditions there may not be enough investors to buy and sell certain investments. This may have an impact on the value of the strategy.
- Counterparty Risk - the risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the strategy’s assets.
- Charges from capital - Some or all of the strategy’s charges are taken from capital. Should there not be sufficient capital growth in the strategy this may cause capital erosion.
- Stock Connect Risk - Stock Connect is governed by regulations which are subject to change. Trading limitations and restrictions on foreign ownership may constrain the strategy’s ability to pursue its investment strategy.
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.
Important information
This is a marketing communication. This document is intended for investment professionals and is not for the use or benefit of other persons. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Company or holding examples are for illustrative purposes only and are not a recommendation to buy or sell. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier. No part of this document may be reproduced in any manner without the prior permission of JAM/JAMI.