It is out with the dog and in with the pig as today marks the Chinese New Year.
It is an event which effectively creates two to four weeks of silence across the country (once the fireworks have stopped) to mark the celebrations.
Some interesting traditions surrounding Chinese New Year include that it brings about the world’s largest annual migration, with over 200m mainland Chinese travelling long distances to reunite with their families.
Superstitions are also popular, with people not allowed to wash their hair or clothes on the first day of the year as it is seen as “washing one’s fortunes away”; sweeping up and taking out garbage is also viewed as bad luck.
A better-known tradition at Chinese New Year is the passing of red envelopes to people of all ages – as a way of sending both luck and money.Despite the trade issues, we are still finding a number of good opportunities among selected Asian exporters.
The Chinese government could perhaps do with a few red envelopes being sent its way at the moment as it seeks to meet the dual challenge of the economy slowing and the ongoing trade war dispute with the US.
At 6.6 per cent, China’s economic expansion last year ‘languished’ to its slowest pace of growth since 1990.
While it is a growth rate envied by the developed world, as the second largest global economy, China’s ripple effect plays a key role in the outlook of the wider Asia Pacific region and indeed the rest of the world, so it is monitored closely.
2018 was a challenging year for Asian equities with the MSCI AC Asia ex Japan index recording a loss of 9 per cent, according to data from FE Analytics for the calendar year 2018.
Other non-China-related factors have also played their part; notably the impact of higher oil prices, as well as rising interest rates in the likes of India, Indonesia and the Philippines.
But the manager of this week’s ‘Best in Class’, the Schroder Asian Alpha Plus fund, believes the current environment in Asia offers value to investors.
Matthew Dobbs commented: “On the valuation front, Asian equities in aggregate now trade close to the levels seen during the last period when regional markets experienced a downdraft in late 2015 and early 2016.
“Despite the trade issues, we are still finding a number of good opportunities among selected Asian exporters.”
Mr Dobbs has managed the fund since its launch in November 2007, with returns of 361.9 per cent in the past decade alone, based on data from FE Analytics in the 10 years to January 28 2018 – compared to 197.3 per cent for the IA Asia Pacific ex-Japan sector.
He joined Schroders in 1981 and has been managing Asian equity portfolios since 1985 and this fund is one of a number of Asian vehicles he runs.
It is a flexible, best ideas portfolio of 50 to 70 stocks, with Mr Dobbs using the large research team at his disposal for local market insight, quantitative screening and risk management.
The investment process is bottom-up with a top-down overlay, with weightings reflecting whether he sees stocks demonstrating visible earnings growth, sustainable returns or are simply attractively valued.
At present, Hong Kong (24.4 per cent) and Chinese equities (22.6 per cent) represent the largest country holdings in the fund, while sector allocations are reasonably spread with financials (20.7 per cent), and information technology (18.8 per cent) the largest.
The fund is designed for investors with a medium to long-term investment time horizon of three to five years and it has delivered top quartile returns of 70.5 per cent and 85.5 per cent over both timeframes respectively, according to FE Analytics data to January 28 2019.
The manager believes there are currently opportunities in domestically-focused growth stocks in sectors like leisure, healthcare, internet services and education. He is also favouring a number of banks in the region, adding that they are strongly capitalised and are therefore able to absorb losses if needed.
Mr Dobbs – together with the Asian team at Schroders – has shown an ability to consistently outperform and find the next growth opportunities in the region.
The fund’s flexibility to do this has made it a winner for investors.