Australia’s immense wealth
Australia has a history of strong population growth – in the last 50 years it grew by 1.4% a year on average. Since 1972, its population has doubled, to 26.5m in Q1 2023, with population growth split roughly evenly between migration and natural increase.

Australia’s retirement savings system, featuring mandatory contributions into the superannuation system, combined with strong population growth, is supporting asset prices, as well as providing a rapidly growing pool of retirement savings, which is already the fourth largest in the world. The 2023 Intergenerational Report (IGR)1 projects that superannuation balances will jump further, to a ~218% share of GDP by 2062/63 – from $3tn now, up to as much as $33tn in 2062/63. Household wealth averaged at roughly $2m for those aged 55+ (for CY 22/23); superannuation benefits (excluding Self-Managed Superannuation Funds (SMSFs)) in 2022/2023 surged 20% year-on-year to $102bn, equivalent to a >8% share of household income.

There are long-term structural reasons to expect foreigners to continue to favour Australia as a preferred destination option. These include the relative resilience of the Australian economy, which avoided a recession for a world record of three decades (until the Covid-19 pandemic), which has resulted in living standards increasing to among the highest levels globally. There is also a recognised trust in the Australian government and institutional arrangements that impact the “quality” of life.

Australia’s population is ageing, but the rate has materially slowed (i.e. improved) given the ongoing fast pace of migration. Overall, the median age of the Australian population is 37.9 years, which is already a significant 3-years younger than the OECD average. By 2050, Australia’s median age is expected to increase to 41.8, but populations in many other countries will age more rapidly. Hence, by 2050, Australia is expected to become an even more significant 5-years younger than the OECD average.

Australia’s share of migrants with a tertiary education is 62%, which is among the highest in the world. It’s also much higher than Australia’s native-born population, with a 43% share. The Australian government Final Budget Outcome (FBO) for 22/23 was a surplus of 0.9% of GDP (or $22bn), far better than comparable economies.

Source: UBS
India – Modi set to win general election
Modi-led Bharatiya Janata Party’s (BJP) win in the three state elections of Madhya Pradesh, Rajasthan and Chhattisgarh, was much better than predicted or expected by exit polls and markets, reinforcing expectations of a Modi win in 2024 national elections, with a greater likelihood of 300+ seats for the BJP. Results for the four state elections show BJP gains in seats and vote share in each state. In 2018, BJP lost elections to Congress in the states of MP, Rajasthan and Chhattisgarh; all three have been won back with clear majorities.

ITC has become India’s largest fast-moving consumer goods (FMCG) manufacturer in the foods space by domestic sales (in the nine months to September, source: NielsenIQ). ITC has emerged as the largest packaged foods company (25+ mother brands, total/direct reach 7/2.6m), benefitting from formalisation tailwinds and high innovation intensity. It occupies top three positions in most categories with share gains (Aashirvaad flour, Sunrise, premium biscuits). Three in four households consume ITC’s food brands, and three quarters of Indian retail carries ITC’s food brands. ITC’s FMCG reach is at 7m outlets, and the business has launched 300 new products in the last three years.
Backdrop remains tough for China
China’s official Manufacturing Purchasing Managers’ Index (PMI) declined to 49, weaker than the median forecast of 49.6 by economists (source: National Bureau of Statistics), marking the third consecutive month below 50. Employment remained in contraction for the ninth time in the past ten months. Meanwhile, China’s real interest rates (a gauge for actual borrowing cost) hit 3% in November, the highest level in almost three years, as deflationary pressure builds. The slide in China’s home sales accelerated in December, underscoring the challenges of the sector. Across the 100 biggest real estate companies, the value of new home sales fell 34.6% year-on-year, to 451.3bn yuan ($64bn), compared with a 29.6% decline in November.

More Chinese agencies and government-backed firms across the country have ordered staff to stop bringing iPhones and other foreign devices to work, including those made by Samsung. The move was broader than previous reported measures in September, when only a small number of state agencies in Beijing and Tianjin were telling staff to leave foreign devices at home.

The Biden administration is reportedly discussing raising tariffs on some Chinese goods, marking a shift from earlier discussions that focused on whether to lower them (source: Wall Street Journal). The targeted goods include Chinese electric vehicles, solar products and EV battery packs for protecting the US clean-energy industry.

We continue to have no exposure to mainland China. We believe China has many deep-rooted problems, including its political system, debt and demographic headwinds, and it is increasingly viewed with suspicion by trading partners, direct investors and portfolio investors.
2024 outlook
This year, we expect to see a two-way pull for markets. The prospect of looser monetary policy globally may allow for P/E expansion and higher prices; meanwhile, many businesses could struggle to prevent their earnings declining if we see weaker economic growth and rising unemployment in key markets, such as the US. Though inflationary pressures have eased, the next leg of this cycle may be one of weaker growth, as the lagged effects of the higher interest rates we’ve seen kick in. Nevertheless, we still expect to see growth in earnings and dividends coming from a good number of the companies that we hold. These include the technology businesses we invest in, which experienced a difficult 2023 but where we think we will likely see an earnings rebound in 2024. Infrastructure, property and telecom stocks ought to feel some relief from a cessation in the rise of interest rates, particularly if combined with a further decline in bond yields.

2024 will be notable for the large number of general elections happening all around the world. In Asia, these include elections in Taiwan, India, Indonesia, and elsewhere. Outside of the Asia Pacific region, key international elections will include those of the US and, most likely, the UK. If incumbents are ousted, we will be mindful of the potential resulting policy changes.

Read our full 2024 outlook here: Outlook 2024: Asia Pacific – A two-way pull for stock markets? – Jupiter Asset Management (jupiteram.com)
The Jupiter Asian Income Fund
Performance
Past performance is no guide to the future. Fund performance data is calculated on a bid to NAV or NAV to NAV basis dependent on the period of reporting, all performance is net of fees with income reinvested. Source: Morningstar. Launch date: 02.03.16. Target benchmark: FTSE AW Asia Pacific ex Japan Index; comparator benchmark: IA Asia Pacific ex Japan
Country weightings: Australia 29.9%, India 18.1%, Taiwan 17.6%, Singapore 11.4%, South Korea 9.5%, Hong Kong 6.9%, Indonesia 5.2%, Thailand 0.8%.

Top 10 holdings: Mediatek 6.5%, ITC 6.2%, TSMC 6.0%, Samsung Electronics 5.4%, Hon Hai 5.2%, BHP 5.1%, Woodside Energy 4.2%, Power Grid 3.8%, Singapore Telecom 3.7%, DBS 3.6%.

Source: Jupiter, FactSet, as of 31.12.2023

Holding examples are for illustrative purposes only and are not a recommendation to buy or sell.
Fund-related risks
  • Currency (FX) Risk – The Fund 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 Fund 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 Fund may use derivatives to reduce costs and/or the overall risk of the Fund (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 Fund.
  • 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 Fund.
  • 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 Fund’s assets.
  • Charges from capital – Some or all of the Fund’s charges are taken from capital. Should there not be sufficient capital growth in the Fund 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 Fund’s ability to pursue its investment strategy.


For a more detailed explanation of risk factors, please refer to the “Risk Factors” section of the Scheme Particulars.

No part of this document may be reproduced in any manner without the prior permission of JUTM.
1 2023 Intergenerational Report | Treasury.gov.au

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 

Investment Risks 

Market movements 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.

 

When investing in developing geographical areas there is a greater risk of volatility due to political and economic change, fees and expenses tend to be higher then in western markets. These markets are typically less liquid, with trading and settlement systems that are generally less reliable than in developed markets, which may result in large price movements or losses to the investment. 

Important Information 

This communication is intended for investment professionals* and is not for the use or benefit of other persons, including retail investors.

 

This document is for informational purposes only and is not investment advice.

 

The views expressed are those of the Fund Managers at the time of writing and 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. 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 any information provided but no assurances or warranties are given.

 

Issued in the UK by Jupiter Asset Management Limited, 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. Issued in Hong Kong by Jupiter Asset Management (Hong Kong) Limited (JAM HK) and has not been reviewed by the Securities and Futures Commission.

 

No part of this commentary may be reproduced in any manner without the prior permission of JAM, JAMI or JAM HK.

 

*In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).and in Singapore, Institutional Investors as defined under Section 304 of the Securities and Futures Act, Chapter 289 of Singapore.