Asian equities: Poised for a post-pandemic rally By PineBridge Investments 05 Jan 2021 Elizabeth Soon, CFA, is a veteran investor in Asian markets who has seen her fair share of rallies and crises – experience that has served her well as portfolio manager of two of PineBridge Investments’ flagship Asia-focused equity funds, the PineBridge Asia ex Japan Small Cap Equity Fund and India Equity Fund. It’s no surprise, then, that amid the Covid-19 market panic, she and her on-the-ground team of equity analysts steered these funds to rank in top quartile over the last 12 months and in three-, five- and 10-year periods.1
Ms. Soon shares her thoughts on investing in challenging times, the outlook for Asian equities, and trends that may drive future equity performance.
After a challenging 2020, what’s the outlook for Asia equities in the next 12 months? Market sentiment has vastly improved since the height of Covid-19 market panic. Investors see silver linings on the horizon, particularly with the Covid-19 vaccine breakthroughs. The brightest spot in Asian equities is China’s economic recovery, which should continue to drive economic activity across the region. Strong domestic demand is likely to sustain China’s recovery, and companies across Asia that cater to this demand have already reported improving sales. With vaccines making their way to Asia, we see fewer obstacles to a broad-based recovery and earnings revival.
Between China’s recovery and expectations for less-confrontational US-China relations under the new Biden administration, what developments are you watching and where do you see opportunities?
China’s economy continues to transform rapidly more than 40 years after opening up. We see multiple developments with the potential to drive growth, not only domestically but also across Asia in the long term. Two trends stand out: China’s rising research and development (R&D) spending, and its push toward greater self-reliance, primarily in technological areas.
Perhaps one of the more lasting trends arising from the trade war is China’s drive for self-reliance– particularly in making critical high-tech components at home instead of importing them from the US, which has restricted or limited their sale in the past. We believe that over the next three years, China will climb the technological ladder. The government has already set a goal of becoming a global artificial intelligence powerhouse by 2030, and Chinese telecom companies are leading globally in terms of 5G implementation.3 China aims to boost domestic semiconductor production to 70% (from 30% in 2019), with the government offering tax cuts and incentives to chipmakers.4 We are keenly watching developments in China’s tech sector and its broader ecosystem to identify and capture overlooked opportunities in this dynamic environment.
India’s equity indexes have reached new highs despite ongoing challenges with Covid-19. What makes Indian equities attractive?
In deep collaboration with our onshore India equity research team, led by Head of India Equities Huzaifa Husain, the team and I have identified major trends prevailing in the wake of Covid-19 and harnessed them into actionable investments.
The funds you manage – the PineBridge Asia ex Japan Small Cap Equity Fund and the India Equity Fund – have outperformed over the past 12 months and also in periods longer than a year. How did you navigate a difficult 2020 and deliver strongly for your investors?
Overall, we focused on companies that were likely to survive and thrive beyond the downturn, rather than those that could have benefited from it over the short term. Most importantly, we stayed true to our core stock selection criteria: investing in companies that have unique competitive advantages, high-quality management, and reasonable valuations.
How do you select stocks for your portfolios?
Over the long run, where do you see opportunities and risks in Asian equities?
Time-Tested Asia Equity-Focused Strategies
Ranked in the 1st Quartile in 1 Year, 3 Years, 5 Years, and 10 Years8
Fund Performance vs. Benchmark Source: PineBridge, as of 30 November 2020. The Fund performance is calculated net of fees on NAV to NAV in USD with dividends reinvested. The benchmark is the MSCI All Country Asia Pacific ex Japan Small Cap Daily Total Return Net Index. Offer-to-bid performance takes into account the maximum 5% sales charge. Returns over one year are annualized. Performance is representative of A class in USD. The Fund inception date is 1 September 1994. Past performance is not indicative of future results.
Cumulative Returns* of PineBridge Asia ex Japan Small Cap Equity Fund vs MSCI AC Asia Pacific ex Japan Indexes Source: Bloomberg, as of 30 November 2020. *Cumulative returns reflect how the value of the fund's shares changed over time, assuming they were held through the entire period and income was reinvested. Fund performance is representative of Class A in USD and is not representative of any other unit class. Fund performance is calculated net of fees, NAV to NAV in USD with income reinvested. The Fund’s benchmark is MSCI AC Asia Pacific ex Japan Small Cap Daily TR Net Index. Rebased to 100 as of 30 Nov 2010. Past performance is not indicative of future results. For illustrative purposes only. We are not soliciting or recommending any action based on this material.
Ranked in the 1st Quartile in 1 Year, 3 Years, 5 Years, and 10 Years9
Fund Performance vs. Benchmark Source: PineBridge, as of 30 November 2020. Bid-to-bid performance is calculated on NAV to NAV (USD) with dividends reinvested. Offer-to-bid performance takes into account the maximum 5% sales charge. Returns over one year are annualized. The benchmark is the MSCI India Daily Total Return Net Index. Performance is representative of A class in USD. The Fund inception date is 12 September 2005. Past performance is not indicative of future results.
Cumulative Returns* of PineBridge India Equity Fund vs Benchmark Source: Bloomberg, as of 30 November 2020. *Cumulative returns reflect how the value of the fund's shares changed over time, assuming they were held through the entire period and income was reinvested. Fund performance is calculated net of fees, NAV to NAV in USD with income reinvested. Fund performance is representative of Class A in USD and is not representative of any other unit class. The Fund’s benchmark is MSCI India Daily TR Net Index. Rebased to 100 as of 30 Nov 2010. Past performance is not indicative of future results. For illustrative purposes only. We are not soliciting or recommending any action based on this material.
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Sources 1 Source: Morningstar as of 30 September 2020 in USD, based on quarter-end trailing returns. Category for PineBridge Asia ex Japan Small Cap Equity Fund: Asia ex-Japan Small/Mid-Cap Equity; Category for PineBridge India Equity Fund: India Equity Time periods greater than one year are annualized. The ranking reflects the fund’s total return rank relative to all funds that have the same Morningstar category. The highest (or most favorable) quartile rank is 1 and the lowest (or least favorable) quartile rank is 4. 2 Source: National Bureau of Statistics, the Ministry of Science and Technology, and the Ministry of Finance, as of 27 August 2020. 5 Source: Bloomberg as of 31 December 2019. 9 Source: Morningstar, as of 30 September 2020 in USD, based on quarter end trailing returns. Category: India Equity Time periods greater than one year are annualized. The ranking reflects the fund’s total return rank relative to all funds that have the same Morningstar Category. The highest (or most favorable) quartile rank is 1 and the lowest (or least favorable) percentile quartile rank is 4. For more details, see https://sg.morningstar.com/sg/report/fund/performance.aspx?t=0P00001EVH, last accessed 17 December 2020.
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PineBridge Asia ex Japan Small Cap Equity Fund (the “Fund”) is a sub-fund of PineBridge Global Funds, an Irish domiciled UCITS umbrella fund, authorized and regulated by the Central Bank of Ireland and registered as a recognised scheme under the Securities and Futures Act (Cap 289) in Singapore. The manager of the Fund, PineBridge Investments Ireland Limited (the “Manager”), has appointed PineBridge Investments Singapore Limited (“PBIS”) as its representative in Singapore.
PineBridge India Equity Fund (the “Fund”) is a sub-fund of PineBridge Global Funds, an Irish domiciled UCITS umbrella fund, authorized and regulated by the Central Bank of Ireland and registered as a recognised scheme under the Securities and Futures Act (Cap 289) in Singapore. The manager of the Fund, PineBridge Investments Ireland Limited (the “Manager”), has appointed PineBridge Investments Singapore Limited (“PBIS”) as its representative in Singapore.
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Information is correct as of 05/01/2021. |